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Yet another person I spoke to was awestruck at my profession and claimed she didn’t understand numbers and was, in fact, afraid to even get into the details of finance and tallying numbers.
While I told her politely that it’s all in her head and anyone can figure out investing, what I really wanted to do was shake her and tell her not to make excuses. Why do we let our biases so often dictate our financial behaviour?
Of course, there are many other reasons that women need to challenge themselves in picking up a basic understanding of investments. I’m not saying money, because women understand money very well. The problem is they rarely ever embrace wealth creation. And this is also the same for men, many of whom shy away from non-traditional financial investments, simply because of the – ‘Oh! I don’t understand that!’ attitude.
Long term wealth creation with the help of right investing will not happen automatically – you have to consciously work towards it. This is also what, later in life, will bring in the financial security to make the life choice you seek the most.
This holds true for men as much as it does for women. Making conscious and aware choices about money’s worth should be part of your behaviour. If you’re just starting out on your career, your first or second job, then this is really the best time to also start moulding your behaviour to become investmentAn investment is made to give you a return. You make an investment if you use your money to buy either physical assets like property or financial assets like bonds and equity with an aim to receive income or gains... More and money aware. Here is how.
- The first step is saving – Today’s young earner is privileged not only to have access to investing platforms on their handheld phone but also the ability to break up their investmentAn investment is made to give you a return. You make an investment if you use your money to buy either physical assets like property or financial assets like bonds and equity with an aim to receive income or gains... More amounts into the small figures. You can invest in mutual funds – be it fixed income or equity – in amounts as small as ₹500 a month. However, to get to this stage, you have to stop spending more than you earn. Which also means you have to stop taking loans to buy stuff and get into the habit of actually saving. Saving means having leftover funds at the end of the month from the salary you earned at the start.
The best way to start saving is perhaps to do it as soon as you get your salary, lest you spend it!
Begin small with just 10% of your salary. Save it as you desire, in a jar, under your mattress or in a sperate bank account or in your parent’s safe. Do this for at least 10 months – you will a month’s salary saved. Now think about starting your investmentAn investment is made to give you a return. You make an investment if you use your money to buy either physical assets like property or financial assets like bonds and equity with an aim to receive income or gains... More journey.
- Stop saying you don’t understand finance and numbers – Only if you studied in a school where mathematics wasn’t a mandatory subject can you say that. And even then, it is not hard to understand basic addition and accumulation of returns. Even those who say they don’t understand numbers, buy fixed deposits, take loans, buy a house, car, pay their employees, fill in their taxes and so on. Numbers are involved in all these transactions. If one can understand and do all this, there is no excuse for not applying it to other financial investments. Remember, the loan you have taken is an investmentAn investment is made to give you a return. You make an investment if you use your money to buy either physical assets like property or financial assets like bonds and equity with an aim to receive income or gains... More for the other side who is lending you the money. It’s really that simple.
However, if you refuse to recognise this simple fact and continue to say that you don’t understand numbers, then you will not move forward.
It’s annoying to hear, ‘I don’t get numbers.’ Yes, you do get numbers when you want to, like in calculating discounts at a store or figuring out your car EMI. Let’s be smarter and understand numbers that add up to your wealth and not just those that deplete it.
- Ask questions before you invest – In simple words, don’t just chase the investmentAn investment is made to give you a return. You make an investment if you use your money to buy either physical assets like property or financial assets like bonds and equity with an aim to receive income or gains... More return, instead focus on why you are investing and where the return comes from. This really requires you to focus on logic instead of greed. The first part is an easier task but often overlooked in favour of high returns. Let’s say you are saving up every month to secure your child’s primary education in a slightly expensive private school. Clearly this is money that you don’t want to put at risk. If someone comes to you with a scheme that guarantees a 15% annual return in the form of interest payout every year, it sounds like the perfect financial investmentAn investment is made to give you a return. You make an investment if you use your money to buy either physical assets like property or financial assets like bonds and equity with an aim to receive income or gains... More. But should you allocate the money kept aside for your child’s school fees? Not before you ask two questions, how will the return get generated and what is the cost of this investmentAn investment is made to give you a return. You make an investment if you use your money to buy either physical assets like property or financial assets like bonds and equity with an aim to receive income or gains... More.
Stop being naïve and thinking that a 15% guaranteed return will come without risk especially when your bank deposit pays you 6.5% a year. If someone is generating this kind of a return, there is bound to be a risk and that means you can lose your return or your capital even and hence, there is no guarantee.
Plus, there will be costs; In insurance-linked investments, for example, there are costs which are not showcased upfront – not all the money you pay as premiumThis is the amount you pay for keeping an insurance policy active. Usually paid in a lump sum at the start of the policy term or annually through the term, it includes all the charges and levies by the insurance... More will get invested. Hence, the return generated isn’t what will be showcased to you.
There is no excuse for not asking the relevant questions; make it a habit and don’t just fall for a good sales pitch.
Incorporate these three basic behaviour changes and then see your wealth grow. But the impact will not be immediate. You have to give this change at least 2-3 years. Only when you see your behaviour change translate into monetary gains will you understand the importance of the three steps above.
This doesn’t mean you have to make your own investmentAn investment is made to give you a return. You make an investment if you use your money to buy either physical assets like property or financial assets like bonds and equity with an aim to receive income or gains... More choices; you can always get a certified adviser to help you with that. What it means is that you make the choice rather than settle for what is sold to you or thrust your way. What it means is that you don’t get fooled by crooks promising high returns only to never return. What it means is that you are in control of your money journey from start to finish.
START YOUR BEHAVIOUR CHANGE CHALLENGE TODAY AND AS A PRECURSOR – READ THIS ARTICLE ONE MORE TIME SO THAT YOU UNDERSTAND EXACTLY WHAT IT IS ASKING YOU TO DO! NO MORE EXCUSES FOR NOT MANAGING YOUR INVESTMENTS – YOURSELF!