Financial Indecision

Over the entire spine chilling January, I happened to meet 4 different sets of ‘chilled-out’ people. Since these meetings were confined indoors, there was more of talking and less of meaningless chatter.

These people were chilled out because they cared so little about their finances.

I met a 26 year old, single male earning a good sum of money. He did not have any debt apart from his monthly motorcycle EMI. He did not eke out any sum to his parents; living in a different city. I asked his savings rate. His savings rate is zero. He lives to earn and earns to live…live life king size. He plans to marry soon and is expecting a big sum.

I then met a couple who are in their early thirties and have a new born baby. Both of them are working. Do they save? Yes, they do. Do they save enough? Yes, they do. So, what’s the problem? They gloat at the ever increasing balance in their savings account. Over the years, their bank has darted off priority membership gold cards which always reminds them of the ‘gold’ they are holding. The problem is that they are saving but are not investing prudently.

Then, the other weekend, over a conversation with tea and steaming momos, I tried to interpret the financial mess of a 40 something having an adolescent daughter and a college pass-out. His financial state was in a similar state as the evening snacks; getting tasteless with time. Over the years, the person has tried to invest all across instruments – tax saver mutual funds, pension schemes, fixed deposit, gold jewelry, childhood plans, ULIPs etc. He was not certain if his financial state can be termed good, bad or passing. Simply put, his investing has been unplanned; just like my snacks – the success dependant on the guest’s appreciation or assets' appreciation.

I also met a 50 year old who has already retired in his mind. His erstwhile appetite for risk free and tax saving investing has now given way to exposure into risky and leveraged investing; after he has managed to develop a decent corpus all these years. He wants to multiply his corpus many times over before he retires in the eyes of the world. This man has saved, has invested; although conservatively, but is falling prey to imprudent investing, late in his earning life.

Then there are a few oversmart people like me, who overdo their planning just to generate a little ‘alpha’ out of their investments. These people speculate their hard earned money over illiquid real estate, penny stocks or day trading.

I am amazed that these set of people exist all across the urban landscape in this age of counseling business channels and duping wealth advisors. Here are my two cents to all my readers:
• Start saving early and invest 40-50% of your disposable income (includes home EMIs)
• Get adequate life insurance and medical insurance for the family as it takes ages to build wealth and an incident to take it away. Also, no complex life insurance. Just the basic term insurance; separating investing from insurance cover.
• Invest your savings regularly in mutual funds (based on your risk profile and goals). No need for specific plans and then
• Retire soon just as I want to.
Till then, Happy Investing