Personal Finance: Planning your career? Don’t forget to plan your finances alongside


For most young professionals it’s a hard nut to crack. How should you go about it?

‘MutualfundinvestmentsaresubjecttomarketriskPleasereadtheofferdocumentcarefullybeforeinvesting’.

Whew! Just writing it made your correspondent feel a tad breathless!

While we have heard this mutual fund disclaimer often, there is a key question. How has it impacted our approach to money and investing?

More broadly, how should the next generation of professionals define their relationship with money?

Saving is a weakness for many of us. Not only is it complex, it is also scary. For most young professionals it’s a hard nut to crack. Managing expenses and savings is easier said than done. If you are young, you are faced with a bunch of important questions – “Why is financial planning even needed?” to “Retirement is years away, why bother now?”

To make matters complicated, there are glamorous and glitzy options that have come in vogue – like crypto, BNPL.

What should you do?

Examples make it easy!

Take, for instance, retirement planning. For most of us it’s a long-term goal. But most people skip it. The reality is that it pays to actually start investing small and early and let the power of compounding do its magic and its math.

Amid all the hype and the confusion, one asset management firm, a few years back, had launched a campaign called “Magic number” to simplify the art of investing. The bottom line: if you had saved 8 times your last drawn salary at retirement, you could retire happy, they said. And at the back of that calculation, was data, hundreds of thousands of data points. This could be just one way to simplify a series of complex calculations around money, the time value of it, the risks to it from inflation and more.

To make it happen for young Indians, they all need to come up with their own magic number.

Goal-based savings

Focusing on goals is said to be the best way to start. But differences in life stage, choices, personal finance and goals make financial planning personalized and subjective for every individual. What may work you might not work for the other. What remains common is the idea to save and grow for a better and safe future.

When emergencies knock on our doors, savings help us to combat them. Leaving doors open unprepared will catch us red-handed and drive us towards unfavorable situations.

Each of us might need immediate and ready-to-deploy funds. Apart from that, we might need goal-specific funds. And then, the really long-term, (at least for the young), retirement funds. Goal-based savings also means looking at safety nets such as insurance – be it life or term or auto insurance.

Knowing these and then planning the early investments, helps the compounding law to also kick in early.

What’s the moral lesson?

Morgan Housel, in his seminal book, Psychology of Money, shared the story of a gas station attendant who retired rich by just doing two things. Diligently saving, every month, over his long career. And investing and also staying invested, through market cycles, in fundamentally strong equities.

Even today in our country, participation in equity markets is quite low. Traditional investment asset classes include real estate and gold. Given the volatility in markets, people are often hesitant to take the step to invest, though in the recent past, many tools have enabled the process of investments to be easier.

And here comes the second lesson from the story. Sometimes, it pays to do literally nothing when it comes to saving apart from investing your money in your decided asset class and specific stock/other asset. Nothing, but waiting. And waiting. And waiting like Sisyphus.

That’s hard for many, who believe they can crack the code when it comes to getting better returns by changing their portfolio frequently. The nut has to be cracked tough for investments to bloom.

Savings to earnings- the path to success!

Saving is needed. But, is it sufficient? For it to multiply, one must work on the earning potential too. And, how can we do it? By nurturing and enriching our skills. The more we invest in our skills and in our networks, the more we can exponentially grow our earning power. Compounding proves quite fruitful here.

As Malcolm Gladwell said eloquently, invest 10,000 hours in practising a skill and then see the mastery we can develop, over time. It’s a smart way to shake hands with an invisible ally – time.

There are a plethora of options to work and build upon earnings capacity. Given the dynamic and uncertain scenario, one can choose to be engaged in more than one job. Side gigs and building one’s own ventures may turn out to be great earning ideas for those with an entrepreneurial bent of mind. For those influenced by artistic ways of earning money, writing books or becoming influences may serve as good choices.

Seneca once said that, “lucky is what happens when preparation meets opportunity.” That encapsulates it all.

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