New Year Resolutions — My Personal Finance Strategy
Growing up, I never made resolutions upon the arrival of new year. I set goals during any feasible time of the year and stick to the path of achieving it. Later the rise of digital media put a bug in us to make new year resolutions. It may be losing weights, travelling to places, quitting bad habits & many more.
Doesn’t matter what goal is set, the results always align with the habits I stick to during the year.
It took me years to understand that habits matter the most. It shapes your life. It decides your present and your future.
I built strategies to achieve my goals. But all in vain if I don’t make it a habit to follow my strategy.
Money was always a taboo matter in my family while growing up. Parents share next to nothing regarding the matter. I was always told one thing that we were poor and couldn’t afford most things. Even buying a tennis ball to play cricket is also not affordable spending for us(In India, we play cricket with Tennis balls. Ha ha !!). Also, I never had any pocket money. I didn’t even know there is something called pocket money given by parents. In college , I received around 100–200 rupees for my monthly expenses during 2010. Some months , it’s not even there.
When you grew up like that, you would always consider that money should be your first priority above all. There are both pros and cons to such thought process.
However, one thing comes to my mind,
“Money cannot buy happiness. But poverty can buy nothing.”
I cannot convince you no more than this.
Whenever I was asked about investment , my only answer is that “You’re your best investment. Nothing else can give you better ROI than yourself.”.
Human life is much more than earning money and paying bills.
On one fine day , a clever man said, “ First be rich then you can become a philosopher.” .
Let’s go straight to the point. I’ll explain some better ways to build your financial portfolio to suit your life goals.
Trick is simple. Write down all your financial goals first then assign one or two instrument to each goal.
All those strategies will be according to Indian context. I will only discuss the instruments I am invested in.
Goal 1: Retirement
Duration : Long term (more than 25 years)
Instrument :
NPS (National Pension Scheme)
EPF(Employee provident fund)
Strategy:
Auto deduction of 5% of my monthly income. Total of 10% of my annual income by voluntary contribution. Auto deduction of 5% towards my EPF by VPF(Voluntary provident fund) option.
Goal 2: House
Duration: Medium term (more than 10 years)
Instrument :
PPF (Public Provident Fund)
ELSS mutual fund (tax saving)
Flexicap mutual fund
Strategy:
2% of monthly income towards PPF(low risk)
5% towards ELSS mutual fund
15% towards Flexi cap mutual fund(Moderately High risk)
Goal 3: Wealth Creation
Duration : Long term (more than 25 years)
Instrument :
· 10 stocks (Mix of blue-chip & Growth)
· 1 index fund (USA market)
· 1 small cap fund
Strategy:
· 15% of monthly income towards stocks
· 5% towards index fund
· 5% towards small cap fund
All those goals aside :
· Health insurance for whole family apart from employer provided insurance.
· Term insurance for myself.
· 1 year household expenses in Fixed deposit.
Mistakes & Lessons along the way:
· Did I break any of stocks/mutual funds for emergency needs ? — Yes. Life isn’t linear. It happens at its own pace.
· Did I fail to follow my own strategy for few months? — Yes. It happened. You would miss some months due to some unforeseen expenses. But it shouldn’t be more than 3 months in a year.
· I used to think lock-ins are bad. It’s usually good as you cannot break your investment before a defined period for unnecessary expenses. You have no choice but to follow a low cost of living budget.
· Not having an emergency fund my initial days of career.
· Investing in digital gold — Not a good idea. Taxation will erode your capital during withdrawal.
· Not making a monthly budget. Most underrated strategy.
