How to steer clear of financial woes in 2021?

Podcast Duration: 08:33

Dost, I have a friend Tamanna who says that 2020 has been her best year financially. She got a pay cut of 10% but without expenses eating out, partying, weekend getaways, two international holidays a year, shopping for each of the previously mentioned activities, birthday gifts, anniversary gifts, a big birthday bash and without having to spend on Ubers, taxis and rickshaws, she has actually saved twice as much as she did in 2019. Even though she is earning 10% less.

Just like the rest of the world, Tamanna is keen that a vaccine be released soon, lekin ussi ke saath she is worried ke life normal hone ke baad woh dobaara kangaal ho jayegi.

Toh how do you make financial preparations for 2021 irrespective of whether a vaccine is released by then or during the course of 2021:

1)Set financial goals

As any big achiever will tell you, goal-setting is the first step to achieving anything great. Agar aap bada savings karna chahte ho, toh goal ke bina nahi ho sakta. Salary ke kam se kam 20%, savings mein jana hi chahiye; 30% would be even better. Ek aur baat: yeh savings goals aapke age ke saath badtha jata hai.

If you are 25 to 30 years old, you better have saved up at least one year’s worth of salary by now, if not more! You barely have any actual responsibilities here, so these are the years to amp up your savings.

By the time you are 35 years of age, you should have saved up approximately twice your annual income at present. If you are earning 12 lakhs per annum presently, you need to have saved up 24 lakh by now. By the time you are 40 years, look at having three times your annual income saved up. The idea is to be able to maintain your lifestyle as the years go by.

If you are 40 years, start ensuring that 15% of your savings are going towards retirement. Some people might even begin this as early as 35.

Many people are considering work-from-home times a great time to have a second (or third) child. If you fall in this category, factor in medical expenses, diapers (did you know how expensive diapers are), school and tuition fees, general being-a-brat-spends (also known by names like glittery pencil box, unicorn pen and XBox) and all the other expenses that go into raising a child while setting your financial goals. The bigger the family you intend to have, the higher your savings per month need to be.

2)Track your expenses - preferably use an app

Note down everything you spend using a mobile app. Yeh app kisi ke saath share math karna, taki you do not get embarrassed about putting down very small amounts, lekin har cheez zaroor note karna. Aapke hard-earned money kidhar karch ho raha hai, yeh jaanna bahut important hai. Phir sab se baari bills pe dyaan dena.

If you are diligent enough you can even try out the Japanese art of Kakeibo, where goals are set for expenses before the expenses are incurred. Ji ha salary ke aane ke pehle goals ban jati hai: I will spend only Rs 5,000 on groceries this month, only Rs 3,000 on shopping, only Rs 2,000 on travel kyuni hum office mein toh nahi ja rahe ho, Rs 2,000 on entertainment and so on. Phir keep a track of expenses incurred. How did you fare?

3)Put down some rules and regulations when it comes to spends

That beautiful pair of heels or white sneakers, that sequinned dress, that wow linen shirt might not see the light of a club for a few months. Why not add it to your investment instead? Use what you have in your closet for at-home Instagram stories. Given how little we are stepping out amidst the pandemic, surely you can reduce your shopping expenses! Once a vaccine arrives too, vow to only buy things that you truly need. Just because something is on sale is not necessarily a good reason to buy it. Here’s a helpful tip: make a list of all the things you need before visiting a sale. Allow yourself only 1 additional buy that is allow yourself to only buy 1 item that is not already on the list.

4)Opt for investing in small amounts

Opt for a Systematic Investment Plan wherein, salary credit hote hi, agreed sum debit ho jata hai. You will also make the most of rupee-cost averaging (some months you will get more units of a stock or mutual fund for fixed monthly sum, and some months you’ll get less… but in the end, it will all average out). Moreover, with that amount being redirected before you have the chance to get your hands on it, you’ll have to practice less self-restraint. If you still manage to accumulate savings, you can always invest a lump sum in addition to your SIP.

5)Track your investments

Irrespective of whether work-from-home has meant you have more time on your hands or no time on your hands, apne investments pe dyaan dena zaroori hai. Zyaada se zyaada logon ke liye work-from-home ka asar hai no free time at all lekin apne investments ke liya time kaise bhi nikal do.

6)Move money about with sound advice

Some of your investments might be performing very well, some might have matured, others might not be performing very well. Check with your financial advisor and move your money around based on his or her informed advice. Agar aap app pe invest kar rahe ho, you can opt for expert advice via the app. Just don’t act on hearsay that is don’t blindly follow the advice of any friend, neighbour, colleague or family member. A financial advisor is someone who knows the markets, handles the capital of many investors as a full-time job and who understands your financial goals and risk appetite.

7)Diversify your portfolio

No matter how well any particular investment or investment avenue is performing, ensure that you do not put all your eggs in one basket. Ho sakta hai - for example - technology sector mutual funds are delivering 25% returns right now. That doesn’t mean you put all your capital only in technology sector mutual funds. Ji nahi, always invest in a combination of investment types across a combination of investments. You can have a combination of stocks, Futures & Options, bonds and mutual funds, maybe a PPF and some fixed deposits too. Some might also want to add gold to the mix.

8)Try a new investment avenue

If you are like Tamanna and have saved a higher amount this year, why not try a new type of investment with your incremental savings. Practice caution and begin with a small amount to see whether it works for you. Ho sakta hai you have never tried mutual funds before. Apne extra savings ko use kar ke try karna? Remember that anything stock-market linked (including mutual funds) will always be subject to market risks toh always practice caution.

9)Spend time understanding various investment options

Since you are working from home, instead of spacing out during that virtual meeting that has nothing to do with you, why not read up about the various types of investment options out there? Besides podcasts like this one, you can also read our blogs or watch our videos. Time nahi hai? Did you Snapchat or check out Instagram today? Post that silly memory that Facebook threw up?

Dost, Instagram pe dusro ki stories aur posts bade interesting rehte hai, lekin usse tumhara capital bad toh nahi jayega. Invest time in improving your life, your finances.

10)Reassess your risk appetite

If you have been unfortunate enough to take a high pay cut, or worse, if you have lost your job during the pandemic, you might not necessarily need to fret immediately if you have been saving diligently. However, you may need to reassess your risk appetite or your comfort level with exposure to risk. You might need to move your capital to investment options that might offer lower returns but higher security for your capital. You might also want to move your capital to schemes that offer regular payouts. You can plan for a small monthly income by option for dividend payout instead of growth funds, for instance.

Optimistic aur positive rehna always important hai dost, lekin to be fair 2020 ka uncertainty 2021 mein bhi jaari rahegi. We can all hope for the best lekin let us still be prepared for the worst. Agar aapke financial situation mein pandemic has made no change, good for you lekin it is still an opportunity to save more and to invest wisely.