Your money, Your behaviour is a series where we are focusing on how individuals can keep their spotlight on what they can control rather than fretting about all things external and beyond reach.

In the first blog, we spoke about your circle of control and in the second, we focused on how you can use your behaviour to impact outcomes favourably. In this last blog of the series, we are going to focus on a very important aspect of behaviour which can change all the outcomes in your life and especially your money life.

At all stages of your life, at all points where you change something you are doing, look around you and assess if you are taking a step, changing a goal, buying a car or dressing up only because others around you are doing the same.

If you are following a herd, you are most likely to reach their collective destination and not the place where you want to be in life. At the destination where everyone crowds, how will you find your place? And how much space will you get when everyone else is also trying to fit in there?

Instead, try to target a destination that is dear to you and only you. A destination that defines who you are and what you want to achieve in life. You’ll find that not only is there a way to reach there, it is not crowded with all others also trying to get there, and because you invested your heart and soul in getting there you have become an expert on this unique journey.

It’s a simple suggestion with an overwhelmingly large impact – DON’T FOLLOW THE HERD.

In life and in money

This behaviour nuance is just as true in life as it is in your money matters. If you are not sure whether you are part of the herd already then do a quick check with these simple questions to yourself.

1. Are you (or did you) studying the academic course most of your friends also chose?
2. Have you followed the professional line guided by your family elders?
3. Do you have coffee at Starbucks because friends and colleagues like to?
4. Do you buy the pair of jeans which are most in style?
5. Do you pick the hand bag from the most popular brand?
6. Your fitness routine is the latest Yoga, pilates or cross training workout?
7. You are buying your first home on loan because that’s what one is supposed to do?
8. You are buying that luxury car on EMI to show others your status?
9. You are pouring that expensive Whiskey or Wine because that’s what everyone does after work?
10. You are planning a vacation to Switzerland because your child’s classmates have all been?

If any of these are a tick mark ‘YES’ then somewhere you are on a path that someone else picked for themselves and not where you want to be.

The dangers of that are:

• You will end up spending on things you don’t really care for
• You will end up taking needless bank loans – especially when it comes to prioritising the house purchase or an overseas holiday
• You will ultimately give up your ability to make decisions and think freely

How this behaviour reflects in financial objectives

Once you start following the herd, your financial goals mirror that too. You begin saving and investing for an expensive overseas education for your child, without even knowing what your child desires.

You begin working long hours to earn a salary that can afford you that car and house, despite not liking your job.

You start a regular 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... plan in equity because everyone is growing wealth through this process, without accounting for the emergency corpus which you never accumulated.

Following what others want can make you jump into investments which are too risky for your financial state. It can also lead you to make decisions without understanding implications or doing the homework – ultimately leading to losses.

Think about it, left to our own devices and choices, would any of us take huge housing loans which tie up 40%-50% of our monthly income? It’s against common sense to do that.

In the early earning years, you really should focus on saving and investing rather than taking on a loan. But as a society, we have pushed this notion so deep inside our mental makeup that owning a home seems to be the end in itself. It doesn’t matter where it is located, doesn’t matter if you approve of your neighbours and it doesn’t matter that you can’t really afford it without 80%-90% of the value being borrowed from the bank.

That’s mistake number 1, buying a house the first chance you get to take a loan and afford a monthly repayment. Remember, you can’t afford the house, only the monthly EMI and that too only till you have a job.

Many young earners start with this mistake because everyone around them is doing it.

Then comes mistake number 2. Investing in high return assets with the idea of getting rich quick and without looking at the risk.

If you are being promised 12%-15% return, it’s not going to come without risk. Even if you are buying equity mutual funds, there is risk. Indulge in risk only after you have accounted for an emergency cushion that can help you through periods of crisis. Investing in equity is not about getting rich quick, it is about slow and steady wealth creation over many years.

Mistake 3, is looking to your friends and family for advice on your finances. They also did what they thought was right for their state in life and for some, it worked out, for others it didn’t.

Why should someone else’s financial formula work for you? Instead look for a qualified advisor to help you if you are not sure which path to take or what decisions to make.

Lastly, don’t make the mistake of not admitting your mistakes and digging up an even deeper trench for your money life. If you have followed others, the panic will be greater when things go wrong simply because you don’t understand what is happening or why.

Behaviour dictates choices

What 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... product you pick, which fund you invest in, which stock you buy are all secondary aspects, the primary is your behaviour.

1. Keep to your circle of control
2. Build your unique skill set with constant focus
3. Save before you spend
4. Start investing early in long term wealth creation
5. Don’t follow the herd

Remember these five behaviour traits whenever you are making any financial decisions in your life. Will the decision you make allow you to remain within these five tenets of good behaviour? Only if the answer is yes, then you should explore the option.

This concludes our series of blogs on this subject. Keep reading our other blogs on behaviour and watch the video series too.

Stay safe. Stay invested.