This is an ongoing three-part series that will document how I run my financial universe. It will cover how I manage my money, how do I invest and put my money to work and how do I keep myself on top of it all. Hope you enjoy reading it and pick some important tips on the go. For Part I of the series click here.
Apologies for the big delay in the post. Things were hectic at work and then there was investment declaration season and I was down with viral fever for two weeks and then business travel. There is finally some semblance of normalcy back in my life and I felt ready to get back to writing.
In the second part I wanted to focus how I operate my investments every month. It took me a more than 24 months to be this disciplined about my savings and investments and it wasn’t without a few failures. The best advice I can give anyone who is trying to build a habit or working towards a goal and failing is this – Keep doing it. Just because you let yourself loose for a day or missed a week doesn’t mean you give up completely. Keep at it and forgive yourself a few slip-ups.
Cash Savings: I sit on a substantial pile of cash every month. Meaning a stash of cash is always lying my two accounts 1) Emergency Fund and 2) Vacation, Shopping & Big ticket item purchases. Every month the money automatically flows in these two accounts and I do not touch them unless I have an emergency expense or a shopping to do. The hardest part about building these cash pile was the fact that I would be tempted to use that money to invest in stocks. In my head a voice would go “But I could divert that money to my investments I can buy XYZ stock right now!…..savings account only give me 6% interest, I can earn much more if I invested that money!” I have been guilty of withdrawing money from Emergency Fund and buying stocks. After I would do that, guilt would hit me in waves and I would start worrying about actually having to face an emergency! Sounds stupid? It was stupid. So I made a plan.
I decided to set a goal for my Emergency Fund. Something like “Reach minimum of Rs 10k in this month and you are free to spend/invest the surplus from that account”. Next month, “So now I have 10k, let me target 30k this month and again any surplus over and above I can use to invest”. Gradually I kept increasing the threshold of the minimum balance I must have in my Emergency Fund and this past January I crossed a sweet mark of Rs 100,000/-. I keep doing that even today and it has totally worked for me.
Mutual Funds: I invest in 7 Mutual Fund schemes every month through SIP. Each scheme I invest Rs 1000/- per month, so every month its Rs 7000/- The money is automatically transferred from my Salary Account to my Investments Account and debited from there. It’s the investment that has my least attention and care. Its automated. I have nothing to look into it. The Mutual Funds schemes were carefully selected and I keep a track of the progress and ROI through my google sheet. But I am more than happy with how my investments in Mutual Funds are shaping up. All I do is increase the principle amount of investment every year (anywhere between 10%-15% depending on my income and expense scenario). This investment is 50% of my total retirement investment so I never even think of messing with it. I treat it with utmost respect. Also redeeming from Mutual Funds usually take 3-5 working days and that’s a lot of time to withdraw money for small/petty/insignificant expenses so it never even crosses my mind to withdraw. I would rather hustle and find other ways to take care of such expenses.
Equity: I love following Stock Market and researching equities and IPOs and market trends. I am not a pro. Neither do I have any background in Finance. I read a lot and ask a lot of questions and attend as many seminars/conferences as I can. I have a Demat account (a mandatory thing in India if you want to invest in Equities/Commodities/Mutual Funds) with a well-known and well-respected brokerage firm in India. The USP of that firm is their research based analysis and recommendation. I read each newsletter from start to end. I then pick a stock I wish to invest, try a thorough analysis with my limited knowledge, check my broker’s stand on the same stock (to make sure there isn’t any upcoming event/government policy that may affect the investment), decide the tenure I want to invest (less than a year/a year/3-5 years etc) and then wait for a price range where I feel comfortable to buy. Typically it takes me roughly 3 months to invest from the day I pick a stock – it’s a game of patience and research and number crunching, but I love doing it in my spare time.
So every month, a small amount is transferred from my salary account to my Investment Account (besides the Mutual Funds transfer) and I do not touch that money till I am ready to take a plunge. There were days I would blindly follow the recommendations and buy stocks “Just because they are such a well-known, large-cap companies. Surely these cannot fail!” But now I am getting better at it. Investing in stock market is a skill and an art and any engaging mind will love it.
PPF: Public Provident Fund is a government scheme wherein you invest a fixed amount monthly or annually for a period of 15 years and earn a fixed return of roughly 8% interest (it keeps changing every year or so) which is 100% tax-free. It’s a safest investment an average Indian cannot resist and the safest bet for retirement saving. I have a PPF account, but I do not invest in it monthly. I only invest when I have spare cash to throw in. 8% for a lock-in period of 15 years in my mind is not the wisest investment move, but it is safest – your capital is protected. So I could not resist. The monthly amount I have committed is Rs 5000/- per month but I invest annually, so roughly Rs 50k-60k is the amount I invest anytime during the financial year. I don’t think about it too much. I look at investing in PPF as a good habit – nothing more.
Besides this, I also have PF (Provident Fund) account which is mandatory saving that is deducted from my salary and matched by my employer. I cannot withdraw my PF account unless I am unemployed for at least 2 months or I am 60 years old (law of the land!) That is another source of my retirement fund, but I have no control over it so I don’t think about it. I do keep a track of my PF balance but nothing more.
That is all the investment I voluntarily look after. I should add that I am an educated urban Indian girl – a privilege in my country that I am acutely aware of. I was also raised by family who has cultivated minds with deep-rooted sense of freedom and they taught me to be a grown-ass woman who can take care of herself. I do not take any of these privileges for granted and try to do the best I can with my situation (good or bad).