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| Capitalstars Investment Advisor |
Rahul earns a good salary. But he doesn’t know anything about his personal finances. All he knows is that he spends a lot and doesn’t have much savings or investments.
We never met in person. I spoke to Rahul over the phone for about 26 minutes. That was enough. It seemed like we have known each other for ages. Rahul spoke like a child, without hiding anything.
“I don’t know where to start. I earn over Rs 2.5 lakh per month. You know, I am spending on things that are absolutely useless. I don’t know what is happening on the personal finance front and I don’t even have a clue about how to plan for the future,” Rahul started the conversation with these words.
“I got married just last year. Till now, I did not have any responsibility and life was just fun. Now, I have started thinking about the future. It is very scary, and I am confused,” he added.
“What are things you have done till now,” I asked him.
“I have a few LICs. I started investing in mutual funds through SIP, but I stopped it after a year or so. I never started it again. I also have a pension plan for which I pay Rs 5,104 per month as premium. I am also paying Rs 35,000 as EMI for my flat in Greater Noida,” said Rahul.
“You must have started all these investments because you must be thinking that it will force you to save at least some money,” I told him.
Rahul was taken aback. “How did you know that,” he asked me.
“Otherwise, you would feel guilty that you haven’t done anything for your future. Now, you have the excuse to continue with your spendthrift nature,” I replied.
I explained to him that investing here and there, without a clear plan, may offer him some mental relief, but it will not take him anywhere.
“Since we cannot see your future expenses, we end up spending or wasting a lot of money. To lead a decent life, we really don’t need much. But the wants do not have any upper limit and we end up spending on our wants. These wants over a period get characterized as called useless stuff, something you mentioned at the beginning of the conversation. To have dinner at home is a need, but going out three times a week for dinner is a want.”
The trouble with many millennials is that they marry late, and don’t want to have kids until mid-30s. They have no clue about their liabilities. They believe that they will be able to save when they need to take care of a goal and their savings would be enough to lead their life to the fullest. However, thanks to their lifestyle and aspirations, they end up spending most of the money they earn. They even use their credit cards or personal loans to fund their lifestyle. All these put tremendous pressure on their finances.
Few things which you can do immediately are:
* Make a limit on your extravagance expenses, say, Rs 10,000 for parties, movies, and so on.
* Get your plan of action ready. It will give you an elaborate idea about how your future would be like as far as expenses are concerned. How much you will have to spend on your kid, how much you will need for retirement, among other things.
* Ensure you automate your savings through SIP. A SIP should be ideally goal-oriented. There should be a SIP for every goal. It will help you to continue with your investments.
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