With the start of the new financial year, most people take a sigh of relief and sit back thinking that they would have more in their hand to spend, and can plan their finances better.

This is, however, when a disciplined approach comes into play and helps in long term wealth creation. With India’s equity investing population still at below 5% of the total population, there is a long way to go and so is the opportunity for the related stakeholders.

The factor that keeps Indians away from the markets and Mutual Funds is the instability and fear because of ‘not knowing’-we have stayed with fixed interest yielding instruments for too long.

The obsession of keeping the principal intact and earning something over and above has been ingrained in our social financial fabric.

If we are financially literate and aware, we can easily earn inflation beating returns as against government specified fixed but low rates.

Prudent financial planning means taking care of your expenses and modifying your current lifestyle to take care of your future goals and aspirations. 

Here are a few rules to follow with the start of the new financial year, which if embarked on, would be of significant help: 

1. Write your goals

Writing channelizes your thoughts and actions towards achieving. Writing brings conviction – goals are otherwise, mere thoughts. 

For example you might have been thinking of creating a retirement fund with some X amount in mind. However, when you write it down and create a goal with say, INR 5 crore as a corpus in 30 years, you would also come to a conclusion about your current assets, cash flow, expenses etc and thus this would trigger a creation of a financial plan. 

2. Learn to be patient with equity

With instruments like PPF, insurance, and real estate, we are very patient and sometimes, patient beyond reason. We need to learn to be patient with our equity investments as well.

If this is an investment in which we have put in our money with conviction, then selling it in hurry should be the last thing on our mind. 

3. Be disciplined in tough times 

This is important because with markets showing a downtrend, people cancel their SIPs. In fact, many take their money out completely. Those with a disciplined approach gain by way of accumulating more units when the markets are down. 

Discipline is also the foundation to earn from the power of compounding. Treat your SIP as a regular, compulsive contribution every month which should be reviewed only once a year or due to a significant change in the financial environment or due to a lifestyle change.  

4. Invest in your financial Education

One of the popular Buffett quotes is: “The most important investment you can make is in yourself”. The excuse that we come across mostly, related to markets and MFs, is that ‘I do not understand these complex products and it seems to be very risky.’ The fact is that people have become billionaires by investing, but mostly by learning & investing themselves. 

Investing in knowledge is one of the pillars of success in the business world. You are confident and prepared when you know what you are getting into! 

5. Don’t forget to execute  

It takes a jolt for people to implement something that they have been thinking of, for days, months or sometimes even years. A step by step approach would be helpful – it is also important to note that you will have to make amends to what you had originally thought of.  

Apply the principle of ‘Elimination’ to arrive at the most significant goal or the most important part of the larger goal. After you conduct all the research and finish the homework, execute. 

6. Always have a Plan B for your income

As in businesses, Plan B helps significantly in maintaining continuity in life and in ascertaining regular income flow. Identify an area of interest which can act as a source of income as well. The times are dynamic and although the options are aplenty today, the harsh reality is that the insecurity and work-related stress has been rising as well. 

There is a lot of talk about ‘passive income’ generation and how it acts as a security against your primary source of income. Investing in MFs can be the easiest Plan B – once convinced, increase your allocation as per your risk appetite and goals. 

7. Act today 

There is no better time to invest than today. If you have 30 years for retirement from today and start a SIP worth Rs. 5000* per month in a fund which gives 15% annualized returns, it would accumulate into Rs. 2.8 Crore. However, the same SIP for a person who has 25 years @ 15% will result  in  Rs. 1.38 Crore. This is a difference of Rs. 1.44 Crore for 5 years! The price for procrastination is huge in equities!

*assuming investment is done at the beginning of each month

So start investing and have a good Financial year!

About the Author

Karunesh Dev is Green Belt certified, experienced financial services professional with more than 12 yrs of diverse experience. He has deep domain expertise in banking,capital markets,mutual funds, training and recruitment.