Financial Life Lessons I Wish I Knew When I was 20

We often find ourselves looking back at how some events unravelled and wonder how we could have dealt with a situation differently if only we had the knowledge we have now. ‘If only I knew’, we say and then move on with our lives.

I recently saw a print advertisement of a guy trying to look cool while probably battling a mid-life crisis, gazing into the future with a house too big for a family of three and a flashy car. The advertisement showcased the benefits of starting to invest early. If my memory serves me right, a steady investment of Rs. 5000 over a 40-year period generated 5x-8x the wealth that the same investment for a period of 30 years could.

I quickly applied this math to myself and I realized that I have missed the bus by 10 years!

So, I looked back and thought of more such buses that I have missed and decided to make a list for those who are waiting at the bus stop so that they could jog a little and board the bus before it gets too late.

• Bus # 1: (Income – Investment = Expenses) vs (Income – Expenses = Investments)

Read the above two equations slowly. Mull over it a little. It would help drive the point home. Most of us live within the second bracket. We need to think of investments strategically. They aren’t something that just happen because we have some savings; instead, they should be a planned allocation of these savings.

• Bus # 2: Needs vs Wants

The next time you see that advertisement for the premium smartwatch brand, ask yourself this question:

“Do I have a NEED for this or do I WANT this?”

Let the Jekyll and Hyde within you fight it out, argue it over and then settle down. Make a smart choice. If there’s an appliance or electronic item that you need, you will have hassle-free financing options like EMIs from the Bajaj Finserv EMI Store and the like, but you should go ahead and purchase these only when you absolutely need them.

• Bus # 3: Start Early, Be Regular

The earlier you start and regular you invest (think Systematic Investment Plans or SIPs), the lesser would you face the need to time the market or get into a very risky situation.

• Bus # 4: Stay for the long term

Long term investment options usually enable you to ride over the fluctuations. Long term commitments pay off, whether in personal relationships or financial decisions. If you have boarded any of the above three buses and hit a bump for a while, evaluate your options well before calling it quits. Invest in analyzing your investments and the market performance before you decide to quit. Consider switching to a different portfolio too, but only exit as the last resort.

Of course, these are rules that you need to keep in mind, but take the final call on the basis of your individual situation. Don’t deny yourself a little indulgence every now and then, go for that scoop of red velvet but keep in mind that your investments today will reap you rewards tomorrow.