Read this before you INVEST!
By Akhilesh Shrotre on The Capital
There is no denying the fact that with money, comes a great responsibility to manage it. You cannot treat the money that you have or the money that you will earn, as if it is an unending resource. We, by nature, have always been more focussed on earning more money rather than managing what we already have. There is no denying to the fact that earning IS important, but if you are not wise with your money management, you might soon land yourself in some serious financial mess one day and rest every possible problem will follow this, including your physical and mental health. It takes one big jolt to ruin all the savings that you have been doing until now. The jolt can come as sudden expenses related to the health emergencies of you or your loved ones. Add to this the fact that we are in a country where healthcare inflation is amongst the highest around the globe.
The younger generation is saving far less than it actually should and managing it even worse. Without the ability to generate enough income, most of us are somehow always thinking of buying things that are way beyond our reach. They just live their life from one paycheck to another. There is a competition to ‘look’ rich which, in my opinion, is nothing less than show-off. Real richness is the feeling when you have no more to worry about your finances if, God forbid, tomorrow you lose your job or bankrupt your business, or you have a health emergency to manage. You are simply able to address these situations without asking for money from someone or taking a personal loan. If you are not able to do these, then my friend, we have an issue to address and a skill to develop — Personal Finance.
Now some people do have a good intention of saving money. They are just not aware of how to do it. Most of the spare money is lying either in the piggy banks or in the savings bank account(not saying that it shouldn’t but there is more to it). This brings us to the concept of “Saving” and “Investing.” Putting money in piggy banks or savings account actually diminishes the value of money with respect to the time before an enemy called ‘inflation.’ So money “saved” in these forms today is actually money spent after some time. To tackle this, you should “invest” your money. Investing money is actually the second step of your money management and financial literacy journey. Before you dive into the investing journey you have a few checkboxes to tick. This is actually the scope of this post. Without these being ticked, I would not recommend you to invest any money because these steps would act as a cushion and would minimize the possible financial blows that you might get.
1. Emergency fund: This fund should have at least 6 months of living expenses for you and your family. This would make sure that you don’t panic if you get fired from your job tomorrow, or your business shuts down. You might have some money to sustain yourself while your search for new means of life. You can keep this fund either in a high-interest savings bank account or in a good Liquid Fund.
2. Health Insurance: In our country, where healthcare expenses are already high and rising, it is a bad idea not to have a health insurance for you and your loved ones. One accident, heart operation, or any other possible scenario and your money are gone. Boom! To avoid this situation, always buy health insurance to have a sound sleep.
3. Term insurance: Another essential to list is this beauty called term insurance. Imagine a scenario where you suddenly die, and no one from your family is active at the moment. Would you like to leave your loved ones without any resources? Obviously, No. To handle this scenario it is always recommended to buy good term insurance. These are not very expensive, and the prices can vary upon your desired insurance amount.
Until and unless you have ticked these, it is a very good idea to control your urges of buying things that can wait for some more time. Because after all, your valuables won’t matter much if you are not able to handle the personal financial crisis.
Happy managing your money!
Do not hesitate to comment below your thoughts and ideas. I post ideas on Twitter too. You can follow me there too. https://twitter.com/akhileshutup
