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5 Money Mantras for 2021

2020 might possibly be the most dynamic teacher we have had in our lives. The year really pushed us to take a step back and take a long, hard look at how our lives are built, the foundation of everyday lives and the framework of how we go about doing it. While the importance of health and a clean lifestyle was brought to the fore, so was the discussion around financial health. 2020 was a year filled with challenges; while the market took a hit, we also saw one of the best equity rallies in a long time! Job security, savings, health insurance and more were the talk of the town, and with good reason. Job security, savings, health insurance and more were the talk of the town, and with good reason. 

This is precisely why we’ve come up with 5 simple yet incredibly effective Money Mantras for 2021, to ensure smooth sailing and a strong back-up plan. Read on to know more. 

BUILD A BUDGET

One of the easiest yet effective things you could do for your money right now is starting to build a budget. It’s the ultimate tool to help you control your expenses and channel your finances towards achieving any goals you might have set. Budgets, at their core, exist on a balance—if you want to spend more on something, you’ll have to forfeit or spend less on something else. This simple practice gradually teaches you how to prioritise your earnings and spend them wisely on things that actually matter. Usually a budget is a combination of your household, transport, personal and miscellaneous purchases. Nowadays, there are many budget-calculating apps that you can download to help you track your expenses—or better yet, talk to your financial advisor for a more detailed approach. 

INVEST IN A GOOD HEALTH INSURANCE

As mentioned earlier, health insurance is the topmost priority in today’s time, and should be treated as such. A good health insurance should cover the basics—this includes hospital charges, pre & post hospitalization included. It should also cover not just you, but your family as well, ensuring that should you ever require the help of your insurance, paying the bill will be the last thing going through your mind. One of the biggest blunders we as a customer make, is to simply assume that we will not require health insurance until we are much older. However, on the contrary, being well-prepared when it comes to your health from an early stage in life will only pay off in the long run.  

BUILD AN EMERGENCY FUND 

Out of all the financial years so far, if 2020 has not convinced you to build yourself an emergency fund, we doubt what else will! If you’ve been thinking about starting your emergency fund, there’s no better time to do so than now. This will help you face potential job cuts/salary cuts, household damage repair and any medical emergencies with the reassurance that you have your emergency fund to help you out. 

DIVERSIFY YOUR INVESTMENT PORTFOLIO

It’s never a good idea to put all your eggs in one basket. The same goes for your investments—diversifying your portfolio will help you stay afloat in the event of an unexpected market crash. And the best part is: it’s not that hard to implement. Diversification operates on a simple idea, that an investment portfolio consisting of different investment types will essentially lead to optimizing the risk. A well-diversified portfolio might include- cash, bonds, stocks, mutual funds, exchange-traded funds. To know more you can contact us and find just the right diversification model for you. 

CURB IMPULSE PURCHASES

Our last point ties back to where we started: setting a budget! When you know you have a budget that allows you a certain amount of expenditure, it automatically helps you steer clear of purchases that you really do not need. One of the best ways to figure out whether what you want to buy is something you really need is to give yourself a waiting period: give it 24 hours or sleep on it. If you still feel the need to purchase it, then compare prices online to pick the best one. If not, you’ll realize that what you almost spent your money on was simply a phase. 

Although these Money Mantras look simple, their impact is anything but. Stay consistent with your budgeting, investing & savings, and trust us—you’ll see your bank account flourishing in due time. For more information, get in touch with us at cagrfunds@gmail.com

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How to keep things on track during the pandemic?

A handy checklist for your reference.

DO’s

  • Increase liquidity – Enhance your emergency funds to double the amount
  • Reduce extra expenses – the lockdown is making us online shopaholics. The general tendency is such that the need for gratification is finding solace in spending online.
  • Use surplus time to build a financial plan
  • Take calculated risks
  • Take a health insurance and a term plan

DON’Ts

  • Take your job for granted
  • Break your emergency fund to trade in the stock markets for short term returns
  • Assume that endowment plans / LIC policies are sufficient life insurance
  • Think that all risks are bad and that one should not take any risk whatsoever
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The 50/30/20 Formula

The path to achieving financial wellness starts by inverting the equation of ‘income minus expenses’ into ‘ income minus savings’.

Does moulding your money habits seem too overwhelming? Does thinking of how to build a road towards the future and get started makes you feel at the end of your wit? You don’t need to grasp at the straws anymore with this budgeting trick! 

The 50/30/20 Formula

The 50-30-20 budgeting rule suggests the division of income after taxes into obligations, goals and splurges.

50% of your income – “Must-Haves”

Warren Buffet calls the Must-haves, “ the heart of your Balanced Money plan”. This section of your income is dedicated to fulfilling all your basic needs which are crucial for your survival. These are the expenditures you need to incur on a day-to-day basis. It also includes minimum payments you need to make on your debts. Such payments may include groceries, utilities, housing, car payments, etc.

30% of your income – “Wants”

Expenditure on items that fall in this category is a choice. The main aim of such expenses is up-gradation of your lifestyle. For instance, buying a Mercedes instead of a more economical Honda. 

This 30% bucket includes vacations, entertainment, gym fees, hobbies, pets, eating out, cell-phone plans, and cable packages. These are things you don’t really need to get by.  A want for some people might be a need for others. For example, some might have photography as a hobby and some might want to pursue it as a career. So such people might spend more on photographic equipment and lessons.

20% of your income – “Savings” 

The remaining 20% of your savings goes to an often overlooked part of your income: your financial goals. This includes debt savings and investments.

Save 20% of my income? That’s impossible! 

Getting your expenditures into the right bracket and balancing your income in these exact proportions might not be possible for you immediately. There might be a real circumstance preventing you from hitting the right equation. 
If yes, then hold on to this key: If you can’t get your money in the exact balance, get as close as you can!
If not 20% of savings, then can you save 15% of your savings? If you can’t bring down your obligatory expenditures to 50%, then can you bring it down to 55%? A 55-30-15 plan is better than a 60-40-0 plan. 

Make Adjustments where Needed.

Granted, the 50/30/20 plan isn’t the only percentage-based budget. All percentage-oriented budgets are entirely customizable.
The percentages you set are adjustable based on your fluctuating income. Perhaps a 60/20/20 or 40/20/40 works best for you. If you just got a raise, for instance, you might be able to focus more on paying off your debt. But, if your rent rates have risen, it could mean cutting back on the amount you set aside for your “wants”. 
Hence, look at your existing finances to set a plan for the long term! You can tweak and revise your spending/saving categories according to your current earnings and lifestyle, allowing your budget to do justice to your current financial situation. 



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Dodge these Investment Pitfalls in 2020

As you take stock of the triumphs and blunders made in 2019, the new year is the best time to brush up on the basics and become a better investor.

Most mistakes investors make are due to their own biases which keep them from making rational decisions. These biases are psychological – they are basically ‘hard-wired’ into us as humans, and in many cases are very helpful in making decisions. In investing, however, they often lead us to poor decisions and loss of returns.

Here are some pitfalls you need to avoid throughout the investment journey as we enter the new year.

1) Out with the old and in with the new

As the difficulty in the market escalates, investors tend to concentrate their portfolio on an investment strategy that has worked previously, thus missing an important turning point.

Your investment strategy needs to adjust as the tides turn in the investment market.  One should always reminisce that no asset class is designed or programmed to move in a straight ascending line. Warren Buffett has summarised it well in 18 words: “Volatility is not the same thing as risk, and anyone who thinks it is, will cost themselves money.”

For instance, temporary losses is often a cause of panic among investors. They tend to sell when equity asset prices start falling, whereas, actually they should be making purchases in a declining market. On the other hand, when equity prices are on the rise, investors generally tend to become avaricious expecting further gains, while that may not be the right move.

Instead, it is recommended to keep an open mind when it comes to investing and make sure you have a balanced, diversified investment mix.

2) Don’t let saving cost you money

Letting idle money waste away is a fool’s errand leading to lost opportunities. “The one thing I will tell you is the worst investment you can have is cash,” is how Buffett explains on how to view holding cash. If you chose to keep ₹50,000 under your mattress for 5 years instead of investing it with a compound interest of 10%, you choose to forego on a return of ₹30,592.05. 

If you’re just saving and not investing, you’re setting yourself up to lose money in the long run. That’s because inflation causes prices to rise, which makes money less powerful over time. The anecdote of losing money to inflation is investing.

3) Quit being silent about money

Not only are we bad at dealing with money, but we’re also bad at talking about money. But, the good news is that the more we talk about it, the more confident we are and the more information we have to make better and less stressful financial decisions.

Sharing and comparing your financial wins and fails is a great way to keep yourself motivated and pick up valuable tips about how you can improve these circumstances more quickly and efficiently. Within this framework, one needs to bear in mind the fact that WHO you speak to on the topic of money and finances does matter. We at CAGRfunds, give you that “second opinion” you need and set you on track to meet your financial goals. 

Mistakes are part of the investing process. Knowing what they are, when you’re committing them and how to avoid them will help you succeed as an investor. Watch this to take better control of your finances in 2020.