Hey! Welcome back. If you’re reading this post, that means from now on you’ve started your personal finance journey.

There are people who have started a new job after college or people who are working for the past couple of years and now, they have little excess money in their savings bank account (even if it is INR.1000 ) or people who had some family responsibilities to complete so you’re late into investment journey and it is completely fine.

Don’t worry, I hope this post will give you all a clear mindset to start with and to build a strong corpus for all your future goals. Let’s get started. 

Why must I Invest?

First, “Why?”. You need to ask yourself why you’re investing your money? Don’t simply say you need to become a “Billionaire”.
I have three things from my perspective on “Why I am investing?”

• To beat Inflation – You may earn lakhs of rupees per month but if you’re keeping them in a savings bank account or in an FD or RD will definitely not make you rich because of the factor “Inflation”.
  Simple, the current FD returns are 5.5% and the savings bank account gives you 3% returns per annum. But the inflation in India will be between 6 to 7%.
  
  E.g.: If you’re buying a product at 100 INR this year, by next year it would be 106 or 107 INR. In the same instance if you have kept 100 FD, by next year it would be 105.5 INR.
  It means you’re deteriorating your hard-earned money by keeping it in Bank or FD, even if you’re earning lakhs per month, you can’t be rich. To fight this, we need to invest in assets that give you a return of more than 7%.
  
  The below snap can give you a clear understanding of how inflation works.

Inflation example – credits: Investopedia

• Goal-based investing – All have our own goals in our life, it can be buying a laptop, car, or bike, fulfilling your traveling goals, expenses for a child’s education or marriage, Retirement Plan, etc. For that why we need to arrange out all the money from our pocket or lend it at the time of attaining our goals. So, we can do investments priorly and withdraw them at the time of your buying it and it is called “Goal-based Investing”.
  
  I invest for my goals as well depending on their term period like short-term (less than five years away), intermediate-term (5-10Y away), and long-term (10Y+ away) based on this criterion I must do my investments between “equity & fixed” instruments and returns of them also vary depending on the time of my goals.
  
  
• Coming to your answer, “Billionaire” – I call it Financial Independence. For people like us who are living a mediocre life becoming a billionaire or even a millionaire(at least 8 Crore) is difficult to attain (seriously). But if there is a good chance for mediocre people like us to be one of them then there is one instrument for it that is the “Equity” market (stocks & mutual funds) and remember that too it is a chance, you may or may not be one, but I would say it is worth trying.
  
  Why am I saying it is a chance? It is the risk involved (volatility) in the market. “The reward you get at the end of the Investment journey is forbearing on to the volatility of the market”.
  
  
  

Pre-requisites before Investing

There are a few pre-requisites before investing, if you don’t follow them, you may regret them later as I did in my, “4 Financial mistakes of my life” (see later). Let me complete the pre-requisite in short and I’ve covered them in four financial mistakes posted already check it out if you want to know about them in detail.

1. Term-Insurance – It provides financial security for your family in case of your demise. Especially if you’re the breadwinner in your family you need a term plan. If you have enough corpus already and your family knows how to source them out without you then you won’t need a term plan. (If so, you don’t need to read this post )
   
   
2. Health-Insurance – The COVID pandemic has made the entire world realize the current medical expenses and can burn a hole in your pocket and suck all our savings which are tough to handle. Having a good health insurance plan for your family can help you balance this situation.
   
   
3. Emergency Corpus – This corpus can help you keep you running for a few more months without a job, or during a pandemic like this, it will be helpful in any way. Saving for an emergency fund might be boring because you’re not saving to enjoy it. And your life will be much worse if you’re not doing it. One needs to have an emergency fund of 3 to 6 months of expenses .
   
   
   

If you’re good at these three then you’re good to start your first investment, if the above three are strong in your personal finance and so you can maintain discipline in your investments without any deviation.

I started to invest in March 2019, and till Dec 2021 I haven’t corrected the above three things. I even felt like it is not important, especially if you’re young you may feel the same. So, don’t make the same mistakes and regret them later as I did.

Hope this post has cleared your personal finance journey and given you some confidence to start your investment. In my next post, I will share where to invest your first 1000 rupees.  

Until next time,
Peranesh S M