The landmark year 2020 comes to an end. Landmark because of a million reasons – which are usually witness only in a lifetime. And it paves way for a new hope for the upcoming 2021.
And like every year, new beginnings are marked by celebrations, fanfare and fervour with friends and family. An unmissable part of every new year are the new year resolutions that we all make.
So, my dear readers, this new year 2021, with the experience of what we saw in the last 10 months – I urge you all to make a promise to yourselves to be more financially responsible. Business/ Job stability is important; however, financial stability is more crucial. Consumption is a necessity, however, only after adequate savings and appropriate investments.
So, if you haven’t started thinking on these lines yet, there is no better time than new year to safeguard your future financially. The keyword is INVEST. As they say – the best time to plant a tree was twenty years ago and the second-best time is now.
For the first time investors – to start is important – add a few financial products like mutual funds, provident fund, gold bonds etc in your basket. The right thing is to begin investing right away, regardless of how much money you save. These small investments balloon into a large corpus over time due to compounding. Optimal mix of traditional and unconventional mix of financial products are out there to be explored and benefitted from.
While investing money in various financial products is important. What is more important is to be financially literate. Financial literacy is our ability to understand how to use money as a tool to help us craft successful lives by the standards that matter to us – Distinguishing between needs and wants; Making smart money choices; Setting and saving for goals.
Being financially independent is of paramount importance to everyone. Working professionals ought to spend time understanding their salary structures; everyone (including women) should manage their finances on their own, make mistakes and learn from them for the future, and save enough to have a buffer to meet contingencies. Having this knowledge supports our ability to make prudent financial decisions throughout life and to respond competently and confidently to the inevitable financial uncertainties that we all face.
A big shout to the parents, who must have showered gift on their kids on Christmas/ New Year. The moment we assume the role of a parent, building a financially secure future assumes top priority, impacting the way we view, spend, save and invest our finances. You can (and should) make sure that you have enough to give your kids a good start in life. But remember it is just a start.
It is important for parents to realize that the struggle to secure the child’s future is pointless if the child is not taught how to manage these finances. Teaching children how to manage money is one of the most important responsibilities parents have. It’s never too early to begin teaching children the basics of finances – How money works. What are earnings, savings and investments, What happens when you buy something? What exactly does a bank do with your money? How do taxes work? What are investments? How do investments grow? How is money created? Why does the value of investments increase with time while that of a car or a phone decrease? Why were prices of things low in the past? Why will they be higher in the future? Etc…..
So, start grooming your child today. This knowledge is more useful than money is – and it could also be something that is passed from generation to generation long after you and I are gone.
If you have been on your investment journey for long, it is likely that you have enough corpus with you and if it is invested wisely, it would have grown in value with time. It is always comforting to have the financial flexibility with time and options on your side.
Money allows people to live longer and healthier lives, better nutrition and better medical care, more free time and more meaningful labor—more of just about every ingredient in the recipe for a happy life. Yet, the relationship between money and happiness (quality of life) is not that simple. The key to happiness is in the way we spend it – basically using the acquired wealth.
The focus of saving money should be to enhance your wealth without compromising on your personal freedom while creating financial security. Though it is common sense and sounds easy but more often than not it is difficult to follow. Mindless saving trades off the present for the future. It is important to know the difference between hoarding and saving. Hoarding can be understood as an exaggeration of an otherwise positive behaviour— saving—taken to the extreme.
Some people hoard money, while others compulsively hoard objects of their interest—jewellery, gold bars and coins, unaccounted cash, etc. Over saving may not be as serious as going into heavy consumer debt. However, going to the either extreme is not healthy. No one can deny that savings is a hedge against life’s inevitable ability to surprise the hell out of you at the worst possible moment. Everyone knows the tangible stuff money buys. But the desire for more stuff is never satisfied and we are left chasing goal posts that are constantly moving.
As Greek philosopher Epictetus said, “wealth consists not in having great possessions, but in having few wants.” The hardest financial skill is getting the goalpost to stop moving. And to do that, you have to stop comparing yourself to others, and start determining what is “enough” for yourself.
One needs to develop the ability to balance the present and future needs, and apportion money accordingly. The most beautiful things in life are not things. They’re people, and places, and memories, and pictures. They’re feelings and moments and smiles and laughter. Spending need not result in material things—there are wonderful experiences the world has to offer if you choose to step out and explore. So, invest in yourself – take a course in photography, wildlife, art, theatre or in upskilling yourself from a professional perspective.
If you recognise that you have enough and some more money, learn to give. Beyond a point it is the act of giving that money that brings joy.
Happy New Year!! Invest and Spend Intelligently!!
Dr. Tarunika Jain Agarwal Ph.D.