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6 Financial Lessons I Learned As A Newbie Working for a Fintech Start-Up

This post is a reflection of my learnings; how I transformed myself from being a finance-newbie to the person who my friends look up to for financial advice.

The first time I came across Scripbox, being a computer science graduate and a marketing consultant, with no formal training on finance, I made a mental note – “I don’t understand finance. This is not a company I might want to work for”.

In school and college, I learned a lot of things that I’ll probably never again use in my life- some advanced, some basic. In my 21 years of formal education, no one taught me one of the most important skill you need to have -  money management.

Fast forward one and a half years after joining Scripbox, my whole perception of personal finance has changed.

This post is a reflection of my learnings; how I transformed myself from being a finance-newbie to the person who my friends look up to for financial advice.

#1:  Think NAC (Net Acquisition Cost) instead of MRP (Maximum Retail Price)

Want to buy the latest PlayStation? It’s only Rs 39,000. You could probably afford it.

To enjoy the game fully, you need a full HD TV which costs another Rs 35,000. Oh wait, your friends will be coming over to play? That’s another Rs 4.500 for the extra controller. And did you get the HDMI cable that costs another Rs 1,000 to ensure full HD reception?

Not to forget the fact that the latest PlayStation games cost Rs 3,000-6,500 a game.

You see how expenses quickly adds up, don’t you?

NAC = Sum of MRP of each product you’d end up buying in conjunction with a single purchase

How can you apply this in your personal life?

When you purchase something, think of the total amount it’s going to cost you (directly and indirectly) and evaluate if the purchase is really worth the price you are paying.

#2: When it comes to making your first investment, just do it

I never invested in the first 2.5 years of my career because I was not too sure of the best investment option that will maximize returns.

My quest for the best investment lead me to inaction- something worse than getting sub-optimal returns.

Sometimes, you have to go with your gut feel and have faith. As Newton’s law of inertia points out about an unbalanced force to start the motion of a body at rest, unless you get that first push in, you can’t start moving forward with your financial goals.

How can you apply this in your personal life?

Go ahead and start your first investment, even if you are not entirely sure. To make things easier, start with a small amount and then increase it every year. As the Nike tagline goes, just do it!

#3: Your risk tolerance doesn’t matter. It’s the risk profile of your financial goal that matters

Investing in equities?

“No; not happening. It’s too risky for me and I don’t really like taking risk when it comes to my hard earned money.”

If you had asked me two years back about investing in risky assets like equities, I would have said the above. After all, you hear the horror stories about someone or the other losing lakhs in equities and going bankrupt.

Take a look at the following table. It shows how much I need to invest to accumulate a corpus of Rs 10 crores by the time I retire if I start at 30 and retire at 60.


If I had opted for the safer route, either I would have accumulated much less than I planned for or I would have to invest close to a lakh a month to achieve my corpus.

Oh, and Rs 10 crore, while it sounds like a huge amount, 30 years from now, is only worth about Rs 1 crore in today’s money value, thanks to inflation (@ 8%).

How can you apply this in your personal life?

Take calculated risks. If your financial goal is easily doable with safer means of investments like Bank FD, then by all means opt for it. But, if it looks difficult like in the table above, be ready to take some amount of risk.

Investing in equity mutual funds, will help you hedge the risk against investing in stocks directly since professional fund managers will be handling your money.

Do note that investing in equities for the short term (<5 years) is not recommended as returns can be highly volatile. Less than 5 years, you should opt for safer investment option like debt funds.

#4: Don’t just blindly follow your parents advice

When I proudly announced to my parents that my salary has increased and I finally fall into the tax payer bracket, the first word of advice they gave me was to buy a LIC policy.

Why?

Because, LIC policy helps you save tax. That was the rationale behind buying LIC policy. Your tax liability increased? Buy more LIC policies was the answer.

While I am incredibly thankful to my parents for having raised me as a well-behaved social being and giving me all the comforts I could have asked for, there are somethings that you should say no to.

Buying life insurance policy to save tax violates a cardinal rule of investing – never mix insurance and investing. Not only that, it’s also probably the least effective way to invest to save tax under section 80C

How can you apply this in your personal life?

Do your own research before making a long-term commitment. For tax saving, opt for ELSS mutual funds.

If you want to take life insurance, opt for term insurance with a lower premiums. Oh and did I mention not to take life insurance plans for saving tax? It’s an expense, not an investment.

#5: You will make mistakes. And that’s OK as long as you learn from it

This, I learned the hard way.

From childhood, we have been trained to believe that making mistakes is bad. Made a mistake in your test? You got less marks; made a mistake when doing the PT drill? You have to run 3 full rounds under the scorching sun.

Most people never get started with investing because they fear they’ll make a mistake. I don’t think anyone learnt to walk without falling once in their life. The same applies to finances. As long as you are able to learn from your mistake, it’s OK if you make them. You won’t gain unless you take some risks and make some mistakes.

How can you apply this in your personal life?

Bought a costly financial product that’s not living up to the sales pitch? It’s OK to have made the mistake. Understand what went wrong and stop investing more into the underperforming product.

Next time you buy a financial product, your learnings will come in handy.

#6: Follow the flight plan

Did you know that an airline is off-course 99% of the time? Yet, it reaches its destination at the scheduled time, precisely. This is possible because the pilots in the cockpit make constant course correction to ensure that the flight stays on course.

How can you apply this in your personal life?

Your financial portfolio too will require constant course correction. Every year, do a review of your portfolio. Rebalance if your portfolio requires it. If you don’t want to do it yourself, then explore automated wealth creation platforms such as Scripbox.

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