New Financial Year is something, not very different from a new calendar year. All of us look back at the year gone by, sigh at the mistakes made and swear not to repeat them in the new year. In India, as our financial year ends in March, and the new year starts with April, its time we make some “Financial resolutions” for the coming year so that we do not repeat old mistakes and do better investing and tax savings.
1. Get rid of the habit of having too many credit cards
Those who are young and have just started to earn, feel highly honoured being offered free credit cards and enjoy earning points on those by spending more. My dear friends, nothing comes free. Your spends through credit cards involve a transaction fee, which is built-in the cost of the product or services you buy. Secondly, you land up spending much more through credit cards than with actual money.
I am not saying that you should stop having a credit card. But use it for emergency purposes like booking a train / flight ticket online where you have to use a card. Also, limit the number of credit cards you possess to two, so that you are not caught in a debt trap. Having multiple cards and spending on all of them, you tend to lose track of the payment dates and would be required to pay heavy finance charges and late fees.
2. Don’t save what is left after Spending. Spend what is left after Saving
This is a Warren Buffet principle of saving and investing. Whatever you earn, if you decide to save after spending for the entire month, chances are, you may be left with peanuts. Rather, decide on an amount you would be saving every month so that it automatically control your spends.
An SIP is a great tool for doing so. Pick up some good mutual funds and start an SIP. When the money is invested in the very first week after it is credited to your account, that much saving is already done. You are free to spend the balance money for yourself without bothering about savings now.
Now, how much do you save? A thumb rule is, you should save at least 26% of your annual earnings. If you are not saving this much, it is time you revisit your spends and cut down those unnecessary. This will ensure not only a comfortable retirement planning but also give you some back-up in case of an unfortunate job-loss (as seen in the recent meltdown).
3. Get Adequate Insurance
Cutting down unnecessary expenses nowhere suggests that you cut down on your insurance cover. Both Life and Health insurance are extremely necessary taking into account the well-being of your family. Life Insurance will ensure safety for your family in case of unfortunate death of the earning member. Likewise, health insurance will safeguard your financial planning from going for a toss, in case of an accident or critical illness.
For Life Insurance, choose term insurance which will give you maximum risk cover at the lowest cost. Do not get lured by ULIPs which fail at both fronts i.e. insurance and investments. (Please read my blog “Look before ULIP” for more info on ULIPs)
For health insurance, go for a family floater policy. This gives you good amount of cover at a lower cost. Most of the employers provide the health insurance policy to employees. I would still recommend buying an additional health insurance as it helps the employees when they change jobs or start up on their own.
4. Don’t leave everything for March
I have seen many professionals, procrastinating investments, insurance, tax saving etc. for March. What these people end up with is buying a wrong product (generally ULIP) which is a highly beneficial product, but for the Advisors (as it fetches them fat commissions).
My personal opinion is to keep insurance and investments as two separate avenues to get good life risk cover and get good returns.
Best idea is to start making your investments in April itself. This will give you good time to study the products, and also earn good returns throughout the year. Also, never make mistake of timing the market. Remember, “Its not timing the market, but the time you spend in the market, that will create wealth for you”. Thus, an SIP model helps you make investments in a staggered way and do rupee cost averaging.
Let March be a month for everyone else to make hastened decisions while you smile, looking at them running around and seeking your advice.
5. Look beyond tax Saving
There are many of us, who are earning in excess of Rs. 5 Lakh a year and still stop at saving Rs. 1 lakh. You ask them a reason and they would say, “80C would give tax benefits only for Rs. 1 lakh”. We recently also heard many people demanding that the overall limit of 80C should be increased.
My question is, whom are you saving for ?? For yourself or for the government ?? If you are saving for your own future, why do you want the government to incentivise you for that ??
This is like saying, if tomorrow, the government stops imposing fines for people crossing railway lines, would you start crossing them ? Is it only government’s responsibility to safeguard our interests ? Shouldn’t we take some responsibility for ourselves ?
The point is, do not stop your savings at Rs. 1.2 Lakh (as per the new budget) just because you get tax saving upto that amount. Make sure that you are saving at least 26% of your annual income and investing it in securing your future.
6. Do the right Asset Allocation
“Divide and Rule” is the name of the game. “Do not put all your eggs in one basket “ is something every person on the street will also understand. Its time we retrospect, where have we put all our eggs.
Putting all your savings in the equity market is definitely not a great idea. But then putting all of it in fixed income products in such an inflationary environment is also heading towards disaster. So what should you do then ?
Make an asset allocation depending on your age and risk profile so that you minimise the risk and maximise returns. Seeking professional guidance can definitely help you. But beware, a blind trust on the Investment Advisor is definitely not recommended. Give some time understanding, where and why he is putting your hard earned money. Demand services like periodic updates on your portfolio so that you know which way your money is growing. Reviewing and rebalancing the portfolio is the least you would be expecting from your investment advisor.
7. Be an alert investor
Practicing alertness from day one would be much better than blaming someone after things go wrong. Although we might try n excuse ourselves to be “too busy”, we have some basic responsibilities of our own money. Few of them include, keeping a track of the bank account statements, credit card statements, mutual fund account statements, insurance policies, income tax returns etc. A regular review of each would keep us updated about the current position and would prompt us to take a timely action in case of something not being in place. Paying charges such as late payment charges on credit cards or late charges on insurance policies or interest on tax not paid on time, would be a sheer insult to our hard earned money.
We look forward to your feedback and comments on the above article. Please feel free to contact us on firstname.lastname@example.org if you have any questions.
(The views mentioned in the article are personal opinion of the author. The readers are advised to use their own judgement and consult their investment advisor before making any investment decisions.)
45 thoughts on “7 Commandments of Successful Investing in the New Financial Year”
Its Aweome, Thanks for so much Ideas, will be Following these 🙂
Thank you so much dear, for your appreciation.
GUD WORK SAURABH BHAI..:)
Thank you so much Sumit Bhai for your appreciation.
YES,Investors must be alert…
he must know what he is doing….
Yes, and this blog is an attempt to make investors alert. Thanks again for the appreciation.
Great Article Saurabh bhai……….
Very useful………….and very knowledgable……….
Thank u so much for your appreciation Abhishek bhai.
The article instills confidence and trust. Its simple to comprehend and enticing to follow. Thank you Saurabh.
THanks for your valuable comments, Shobhit. Looking forward to more visits and insights from you.
Great Saurabh bhai. thse are the very basic thing people should. thanks for you have shared the knowledge with us.
Thanks for your appreciation Rajeew Bhai. Look forward to more visits and valuable inputs from you in future.
Goog Work Saurabhji. Today people must surely think and invest. Not only invest, but make a right investment at right time !
Thank you Shweta ji. Always feels good to receive appreciation from friends. Thanks again.
Good work bro, keep it up. good wishes with u
Thanks bro. Thats like a true friend. Patting for the right reasons. Thanks again.
Extremely useful article. Very comprehensive and well-written. I would call this ‘Intellectual charity in financially backward (or rather progressive) India’. Weel done and keep it up.
Thanks for your appreciation dude.
This is your second article that i am reading on Financial Investments and shows the effort put in and the study done by you. Another classic posting from the Professor!!!! Look forward to many more… !!!
Thank you so much Sir. Its all your love and support that inspires me to do so. Thanking you again with a promise to keep trying my best to continue writing in the interest of investors.
Good article sirjee. I believe in using Credit card as convinience rather than a temp loan is a bette option. Ofcourse you will have to pay convience cost that built in as you explained. Anyway as rightly said you don’t need more than one card for convinience. Your encouragement for beyond 80C and investment throughout the year is remarkable. Its a common mistake that I saw many people does. (Slightly off-topic but same applies to filling IT returns why wait till July 31st).
I think biggest confusion area is Right Asset Allocation. Everytime I hear this term the question comes to mind is how can I know that I have right allocation? Please consider writing a blog on same using some example etc. That will help us to understand it better.
Overall hats off to you on such a mice article. Looking forwrd for more such educational articles which will guide investors. Often we get tricky advices from agents that is benefical but to them. Unbiased articles like these are rare. Keepup the good work.
THank you so much for your support and encouragement sir. Its only the pat from you people that drives me to write such article.
Thanks for the great suggestion of writing an article on right asset allocation. I will make it a point to write the same as soon as possible.
Lastly, thanks again for your appreciation. The purpose of these articles is to educate the investors so that they don’t get cheated and the investment industry grows as a whole.
Great Article….Bhai….This is what was needed to explain, in very a uncommon way…..your article has done just that…
Thanks bro. Am glad u liked it.
Excellent article. This shows intelligence & in depth knowledge of yours in investments. Great going. Keep it up.All the Best.Regards
Thank u so much Mamaji. Look forward to more visits and inputs from you. Thanks again.
Great Article….Bhai….This is what was needed to explain, in very a uncommon way…..your article has done just that…
Awesome work Jiju…u juz rock…
Just add one more rule to it ….never take debt to fund day to day expenses or buying a depriciating asset(like buying cars out of your reach)…Take debt only when you are building assets( House, land etc) against it
So Very true Sir !! Am Wondering How Did I miss out on such an important thing. Thank you so much.
Looking forward to more such visits and valuable inputs from you in future.
Good one dude! Reminds me of the heydays and you sitting cross legged on your bed next to the window with the ET in your hand.
God bless you and may you become an icon of the investing world. 🙂
good one dost!!
Very nice article sir…. this is must read for any person who is looking for investment . People miss out on these basic aspects while investing … we spend so much time earning that we lose the trick of investment.
I specially liked the Insurance one ; this is very timely courtesy the spat between the SEBI & IRDA on the ULIP scheme. I had never believed in a ULIP scheme & this article plus the earlier one clearly brings out the peril of ULIP
Thanks for the compliments sir. Looking forward to more visits and valuable insights from you.
Very insightful and helpful stuff. If all of us make a habit of financial discipline our lives would be much better
Very true Sir. Thank you so much for your comments. Looking forward to more visits and insights from you.
saurabh sir ur 7commandment r just great i think one should definetly think about investment but people like me suffer due to lack of guidance ,sir its my request to u to plz guide me if possible
Dear Swapnil Sir,
thank you so much for your visit and comments. As regards guidance, I am always ready to provide any guidance to my friends. Please feel free to call / mail whenever you require any guidance from me.
I think its important for us girls a lot, so that u guys can build ur assets on the money we save from shopping….
Thanks for your comments dear. It is in fact, important for all of us (irrespective of being a guy or girl) to save and plan for a good future.
Also, its not that the guys build “their” assets on the money. The assets will be useful for all the members in the family. 🙂
Looking forward to more visits and feedback. Thanks again.
Parctical article. Practical advise. Simple to understand. Good work.
Thank you so much for your comments Mr. Vishal.
Please do keep visiting this space for more such articles. Thanks again.
Its really an informative article. I like it because its very helpful for me to understand the logic behind the investments. Thanks for sharing.
Thanks for your valuable feedback Mr. Monu.
I am glad to know that this article helped you to enhance your knowledge. Suggest you to keep visiting this space for more such articles.
Looking forward to more visits and feedback from you. Thanks again.