Rahul may be young, but as a teenager his father helped him pinpoint investment opportunities, and he’s been going it alone for the last two years. As he explains, he has clear ambitions and long-term goals when it comes to growing his finances. “My dream is to enhance my family’s lifestyle,” he says, “to have enough money to allow my kids to pursue their dreams, and for my wife and I to have access to things we never thought we could.” In fact, he is already keeping an eye on life in his 60s and beyond. Rahul is currently planning for his retirement and has been in talks with his relationship manager to help further grow his wealth.
Studying for an MBA had depleted much of Rahul’s savings, so he started off with a modest one-time amount of INR 100,000 to invest and key goals to:
Save at least INR 500,000 per year to allow for an overseas holiday.
Buy a bigger sedan/ SUV in three years, costing around INR 30 lakh.
Purchase a house in three years, worth at least INR 3 cr ideally before the age of 35 (which may require debt financing).
Build savings of at least INR 3 cr in the next 18 years to support his children’s education.
Invest in another house in the next 10 years, worth at least INR 3 cr (especially if he can save more and service the debt on the first house faster).
So far, Rahul has:
Saved enough money for an annual family holiday.
Achieved 33% towards his dream of buying a bigger sedan.
Accumulated 10% towards buying his first house (a sum will increase going forward now that he doesn’t have the expense of funding his own education).
Succeeded in tracking towards building his savings to INR 3 cr and buying a second house within his expected time frame.
Tip #2 Pay yourself first
Every month, at least 33% of Rahul’s salary is automatically debited from his main salary account into his savings account. “You should have no access to this as part of your monthly expenditures. Be sure not to view your savings account as your ‘go-to’ bank account – this small tweak helps with savings immensely,” he advises.
Tip #3 Build splurges into your budget
“It’s okay to splurge as long as you do so responsibly — we should also enjoy our life!” he adds. “When I travel, for example, I budget a certain figure and then add a 20-25% contingency, due to the exchange rate or price increments at the destination.”
Part 2 – How to invest the money you are saving
Tip #4 Start investing only what you are prepared to lose!
“Start off with a modest amount that you are prepared to lose, to gain real experience in monitoring investments,” says Rahul who started off with INR 1 lakh as a one-time investment.
Tip #5 Be patient, it’s a long journey
Planning for the long term is key, investments will not grow your wealth overnight. Having a long term goal that has milestones along the way, like Rahul, helps to keep focus. When deciding on his goals, Rahul looked at what he missed out on when he was growing up, and what is important to him in the future.
Tip #6 Make friends with your bank
Banks are a good resource for starting off your investment journey. Usually they will have online platforms for starting off in mutual funds and then moving over to other products. You can speak to your relationship manager who can structure your investment journey based on your requirements and risk appetite.
Tip #7 Branch out to minimise risk
“Do not concentrate your investments in a certain company or even asset class,” advises Rahul. Diversification is good, as it spreads the risk. If you are new to investing and don’t know how to choose go for mutual funds or unit trusts – as these are already diversified, by investing in a basket of companies.
Tip #8 Build your investment knowledge
“One of the best pieces of advice I received is that you should always understand what you are investing in,” explains Rahul. “This includes knowing the downsides, not just the up sides. When it comes to mutual funds, I go through the data provided by online investment sites before I make my decision on whether to invest or not.
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