‘The key is to start early, howsoever small it is...’

‘The key is to start early, howsoever small it is...’

In his book, Financial Spirituality #SabMohMayahai #Millenials, Rishabh Parakh, a chartered accountant, gives a lowdown on how the newly employed should invest early on in their career and how to plan, protect and play. The book has been published by Sakal Publications. Here’s more from the author....

What encouraged you to write the book? What is the target readership you kept in mind for this and why?
Over numerous conversations with clients and attendees at seminars, I realised that the problem we had 20 years ago no longer exists. The problem then was lack of information about financial planning and investing. Today, the problem is about having access to a lot of information but not knowing what to do about it.

I have written over 200 columns for a number of leading publications over the years, including Sakal. The logical thought process seemed to take it ahead and write a book to share the same lessons and more. 

The target readership for Financial Spirituality is the millennial generation. Here, I mean everyone who is starting off with their career or is in the first few years of their career. This generation thinks differently as compared to the previous generation, and has more time in hand to be able to take more risks with regard to their financial planning and investing. 

Millennials complain about a crumbling economy that makes it impossible for them to buy a house or save enough money to invest. What advice do you have for them?
The economy is definitely down right now. However, it is growing at around a rate of 5 per cent, and that is still growth. My advice is to not think so much about the state of the economy and the market. Instead, start investing as much as you can, even if it is an amount as small as 1000 rupees a month. You can always control your spending habits and investing, the key is to start and start early, howsoever small it is.

Where do you think most millennials go wrong with personal finance?
I believe that the most common mistake that everyone makes, not just millennials, is to jump the stages of life. We always recommend following the philosophy of ‘plan, protect, play’ at Money Plant Consultancy. Depending upon the stage of life that you are at, you need to follow the discipline that is needed and ensure that your saving, spending and investing follows a reasonable pattern. 

So first make sure that you do your right financial planning to meet your financial goals like buying a house, car, getting married, kids’ education etc. And in case of any emergency, you are protected both by sufficient life and health cover for you and your family. Only then you can switch on to the play mode where you have financial freedom to do whatever you wish to do. 

For example, buying a phone worth Rs 90,000 is a problem, if you are funding it through EMI. You can buy a product like that when you have disposable income that is many times more than the cost of that particular phone. Getting rich is not a difficult task unless you are in a hurry.

What steps can one take to manage their money properly so they can save enough to invest?
In the book, I have talked about following the ‘get set go’ approach. Here, you get clarity regarding your financial goals, set a plan in action, and then go for it. If this approach doesn’t work, then I would suggest the ‘go, set, get’ approach. Here, you take action first. Invest somewhere without thinking too much about whether or not it will fit in your long term financial planning. You will build up the habit of investing through this. As some time passes, you will understand what works and doesn’t work for you. Once you get this clarity, modify your planning and action accordingly.

For someone who plans to invest money for the first time, what should they take into account? 

  • I have addressed this very question in the book. I believe there are seven questions to tackle.
  • What are you saving for? Your portfolio must be aligned to your goals.
  • What is the purpose of your financial planning? It must be to achieve the ultimate financial freedom. 
  • What will happen if you lose your job/source of income? You need to have a contingency plan in place. 
  • What will happen to your family in case of any unfortunate event? Protection is an important pillar of your financial planning.
  • When do you want to retire and how do you want to spend your golden years? If you are clear about this, then your financial planning becomes much easier.
  • Who is dependent on you and your income? You need to work on this as it plays a role in your financial planning.
  • Which financial products to invest in? Once you have done your homework, you can then focus on finding the products that suit your goals. 
  • This year, two different tax regimes have been introduced. The choice of the tax regime that one wants to go with needs to be carefully decided according to the deductions that you avail of. Each person needs to do his or her own math to decide which regime to choose from. 

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