Hiccup No. 1: Let my salary grow
We always wait for our salaries to grow to start saving, but that day seldom comes. We all have commitments, and we as individuals keep our commitments before our savings which obviously is a wrong thing. Even if we start saving we don’t increase our savings not keeping them at par with our increasing salary.
Solution: Later you start, lesser will be your savings growth. You can actually accumulate more wealth if you start saving early. Even if you have less money left after you are done with your expenses, try to save. You can start from as low as Rs. 1000/-. This will not only help you in kick-starting your savings but once you see your savings growing, you will feel like adding more to your regular savings kitty.
Hiccup No. 2: I am earning enough to serve my needs, why should I save
If we are earning a comfortable salary and are able to meet ends, and still there is some amount left at the end of every month, we assume that we will be in this comfort zone for all our lives. We don’t think of situations we might get in like sickness, job-loss, old age. We always think nothing would ever happen to us.
Solution: Nothing is permanent. Some understand it in earlier stage of their lives while some take time. However, it will do no harm if you plan for your future and save accordingly even if you think you are earning sufficiently. Because we often tend to miss inflation and the way it will haunt us once we retire.
Hiccup No. 3: Let my loans get over
When we have any of the loans on us, we think of it as a burden and try to get rid of it as soon as possible. Even if we get a very good investment opportunity, we think of first clearing our loan and then start the investment.
Solution: All loans are not bad. You should see the interest rate you are paying on your loan. If the investments you are doing are fetching you better rate of interest than your loan, it is better to start your investments as well. For e.g. For someone having a home loan at 8% interest rate gets an opportunity to invest in long term equities where he can easily get 10-12% on his investments (long term). He should start his investments along with, as they are fetching more returns on his money and also, he is getting tax rebate on his home loan.
Hiccup No. 4: I don’t know where to save
‘Give me too many options, and I get confused.’ This situation is true for everyone. The moment we get too many options, we get confused and delay our decisions which might result into inaction. Many a times since there are too many financial products on offering, we all prefer inaction rather than any action at all.
Solution: Ask a Financial Planner. It is true, that there are many financial products available but each product is defined/designed keeping a set of investors in mind, some might be aggressive, some might be long-term investors, or others might be regular savers. One needs to know, what category he/she falls in and invest accordingly. And none other than your financial planner can help you on defining your financial aspirations. Here we are talking about a financial planner and not a distributor.
Hiccup No. 5: I am waiting for the right opportunity
When the market goes down, our dialogue is, it will fall further, I will invest then. When the market goes up, we say it has gone too high, let me wait for a fall to invest, and the vicious cycle continues. Even if it is a debt product, we don’t invest much because the lock-in is too high or some other cause comes to our rescue as a reason for not investing.
Solution: Start with Systematic Investment Plan (SIP). No one can ever time the market, we all make assumptions, sometimes they are correct and sometimes they are wrong. But the key is to START. And what better than investing systematically at regular intervals, and trust me you wouldn’t even know how well you have accumulated once you start your regular investments.
Charu Hastir, CFPCM is founder of http://www.theriteplan.com/. Rite plan is an online financial planning portal created to achieve a single objective of providing easy and Do It Yourself Financial Planning to netizens. Rite Plan is wholly owned by Tikkun Olam Financial Planning Services LLP. Please visit: https://theriteplan.com/index.php?route=common/home/