The Power of Common-Sense
The journey of a thousand miles begins with a single step. Likewise, successful financial planning starts by maintaining and religiously following the personal budget. People are so obsessed about the union budget proposals and endless debates around the grand annual show every year. India witnesses so many ‘expert economists’ before and after the union budget presentation.
However, when it comes to the personal budget, most of us are clueless. The union budget may affect your life to a certain extent. But if you sincerely devote your attention to the personal budget, this will surely do a world of good to your financial life. If you don’t write down expenses and compare them month on month, year on year; how on earth will you know your personal inflation rate? And then how can you fight the silent killer i.e., inflation. The buck stops here. Let’s get our budgeting act together. This
is where it starts.
Great, so now you know why it is important to follow the budget. If you observe carefully, the biggest line item in many households’ budget is “Keeping up with the Joneses”. That is: ‘If my cousin/my friend/my neighbour/my colleague has bought something, I must too, in fact I must buy something better’. True, isn’t it? But then, what game are you playing? There is a broad sunlight between being wealthy and being seen wealthy. Getting wealthy is a long journey but the real challenge lies in staying wealthy. Please introspect, you may save a lot more if you focus on your own life and its little pleasures. Live the life you love, that’s a key to happiness.
Investing is not a sport where the fastest or the most intelligent person wins. It is also not something where there are only few reserved slots for winners.
We all can win while investing if we play our own game, follow our budget, manage our risks, pursue our goals. Unfortunately, not realising the fact that personal finance is more personal than it is finance, we want to beat others including markets. For e.g., if one is able to meet financial goals comfortably by earning an annualized of return of say, 8–9% p.a., does he/she should really care about the SENSEX return or anyone else’s portfolio return? If you follow the process and play your own game with the right focus, the job is more than done. A Pujara cannot bat like Pant and vice versa but both are very effective players for the Indian team, right?
“There are only two options regarding commitment. You are either IN or you are OUT. There is no such thing as life in between.”
- Pat Riley
Investing is as much about losing less than about winning more. What can we learn from the game of Tennis? Professional tennis is about ‘hitting winners’ and amateur tennis is about ‘avoiding unforced errors.’ Full time investment professionals strive to arrive at the ‘winning investment idea’, the common investor on the other hand should focus on ‘avoiding mistakes that may lead to losses.’ The problem arises when the amateur investors start acting like a professional. Don’t try to be a Federer/Nadal/Djokovic, be yourself.
“It is remarkable how much long-term advantage people like us have gotten by trying to be consistently not stupid, instead of trying to be very intelligent.”
- Charlie Munger
Common sense is not so common these days, let’s use this superpower while investing.
Article by:
Aditya Karnik — Aditya is a management graduate and a CFP who has spent over 12 years in the financial services industry. He has been associated with Sapient as a Wealth Manager for the last 3 years. He is a Federer fan and has a keen interest in Sports and Music.
