YOU CAN DO IT!
IT'S EASIER THAN YOU THINK.
No one is born knowing how to save or to invest. Every successful investor starts with the basics.
A few people may stumble into financial security- a wealthy relative may die, or a business may take off. But for most people, the only way to attain financial security is to save and invest over a long period of time.
Time after time, people of even modest means who begin the journey reach financial security and all that it promises: buying a home, educational opportunities for their children, and comfortable retirement. If they can do it, so can you!
KEYS TO FINANCIAL SUCCESS
- Make a financial plan.
- Pay off any high-interest loans.
- Start saving and investing as soon as you've paid off your loans.
What are the things you want to save and invest for?
- a house
- a car
- an education
- a comfortable retirement
- your children
- medical and other emergencies
- periods of unemployment
- caring for parents
Make your own list and then think about which goals are the most important to you. List your most important goals first and years to achieve them.
KNOW YOUR CURRENT FINANCIAL SITUATION
- List down your assets and liabilities. Find out your net worth. Find out liquid net worth.
- Update Net Worth Statement every year to keep track of how you are doing.
KNOW YOUR INCOME AND EXPENSES
- Write down your monthly income and expenses.
- Bifurcate expenses between discretionary and non-discretionary.
PAY YOURSELF OR YOUR FAMILY FIRST
- Many people find it easier to pay themselves first if they allow their bank to automatically remove money from their paycheck and deposit it into an investment account.
FINDING MONEY TO SAVE AND INVEST
- If you are spending all your income, and never have money to save and invest, you'll need to look for ways to cut back on your expenses.
The general observation is that the most difficult person in the market is us, who are investors. We don't understand ourselves very well. We have not put the effort to understand our investment style, the difference in various products available.
For example, a few years ago very few products were available for investing. Most people used to invest in fixed deposits, insurances.
Few savvy people used to invest in shares and mutual funds.
But look at noise today, unlimited investing options available- virtually unlimited.
People feel left out sometimes for a while. The point is it's okay to feel left out for a while.
The question is how much time are you willing to dedicate to learn about your own risk appetite, how many investments you can tolerate to lose completely. And how much money you are going to need in the future.
Some of this planning can be done very easily. There are tools available to automate all these things.
Also, don't get overwhelmed because wealth creation is not something that will happen over a month or even a year. It's a process that is going to take really long. It's like your health. You can't eat only salad for a month and be good for the lifelong. You have to continue and keep having that discipline.
The author is Founder and Catalyst at Aaditya Chhajed Financial Services and can also be reached at email@example.com
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