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Invest, Don’t Save : Guest Post

This article has been written by Dr. Akshay Kothari. His passions include photography, stock markets, medicine and networking., and writing is soon going to be listed under this list of interesting passions.

28 year old salaried professional.
No known diseases.

Presented with complains of acute loss of income over the last 1 month along with a new stress of going broke.

Patient was apparently happy until last month by maintaining a paycheck to paycheck lifestyle. History of-

  • School and College education which gave the ability to earn, but not to manage money.
  • Rampant credit card use and no interest EMIs on the back of (now doubtful) future earning potential.
  • Splurges on gadgets like iPhone, apple watch, air pods, JBL speakers & 55″ Smart TV.
  • Socializing every weekend with a frequent Rs 3000 expenditure per night (avg) in an inebriated condition with subsequent regrets next morning.
  • Recent purchase of a SUV on loan associated with inability to cover its monthly maintenance costs.
  • Plans to purchase a 3BHK costing Rs 1Cr on loan.
  • Significant alcohol and tobacco consumption, along with other material luxuries.

No History of-

  • Tracking monthly expenses.
  • Any Mutual Fund research.
  • Any passive income source.
  • Any effort to understand about inflation and its effect on the future purchasing power of the money saved today.
  • Taking Life or Health Insurance despite having Auto insurance (do cars need more insurance than one’s body?🤔)

Financial Vitals-

  • Present Employment Status: Doubtful
  • Bank Balance : Rs. 4500
  • Outstanding Loan : Rs. 10 Lacs
  • Outstanding EMI : Patient unaware.
  • Savings : Patient exclaimed ‘LOL!’



Understand concepts
Life expectancy in India (The need) – As an economy grows the average life expectancy of its people will increase. So the patient will live 20 years more than his parents.
That means he has to save more than his parents to cover his expenses in those extra 20 years.

Inflation (The problem) – The interest rate on your savings should be greater than the inflation rate in the economy (approx 6 %).
A lower rate would mean lesser purchasing power of the same amount in the future.

Compounding (The solution) – Einstein called compound interest the eighth wonder of the world. The entire stock market and mutual fund universe is based on the concept of compounding.

  1. Repay all debt and credit card dues first. Debt is injurious to financial health.
  2. Target to save 50% of your earnings henceforth. Alter lifestyle to live on the rest 50%. Don’t buy things on credit as far as possible. Spend on things which increase productivity and save time.
  3. Insurance : Get a TERM INSURANCE and a HEALTH INSURANCE for yourself. Your term insurance amount should not be less than 10 times your yearly income and should cover you till 60 years of age at least.
  4. Goal based saving : Put money in Debt Mutual Funds rather than in savings account for upcoming financial needs over the next 2-3 years. Put rest of the money in Equity linked Mutual Funds.
    Start SIPs in max 3-4 good funds and DO NOT STOP SIPs WHEN MARKETS GO DOWN. Multicap funds are a good option for long term investing. Track returns yearly and not daily.
  5. Emergency Fund : Create a fund for any unforeseen emergency like a hospital admission. An amount which is 6 times your monthly expenses saved in Debt Mutual funds is the way to go.
  6. Try to develop passive income sources. Passive incomes will improve your monthly cashflows. Being rich is really about having good monthly cashflows.
  7. Buying a home is a tricky subject. Go ahead if you need it yourself. But remember that its a poor investment compared to equities in the long run. So staying on rent is really okay.
  8. Read good books and watch YouTube videos to become more mindful of money. Surround yourself with company who understand frugal living.
  9. Don’t compromise on having life experiences just to save. After all, YOLO!

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