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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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Feelings & Finances – the domino effect

Women, emotions and the impact of that on the relationship with money.

The Law of Attraction is the ability to attract into our lives whatever we are focusing on. It is believed that this law uses the power of the mind to translate whatever is in our thoughts and materialize that into reality. In basic terms, all thoughts turn into things eventually. If you focus on negative doom and gloom you will remain under that cloud. If you focus on positive thoughts and have goals that you aim to achieve, you will find a way to achieve them with massive action. The Law of Attraction dictates that whatever can be imagined and held in the mind’s eye is achievable if you take action on a plan to get to where you want to be.

So how does any of this relate to money? Simply put, money is not about finances but all about emotions. And our emotions are largely driven by how we think. Women are generally known to be  the more emotional gender and therefore, led by it. A study done by the National Center for Women and Retirement Research (NCWRR) showed a direct correlation between a woman’s personality characteristics and her financial habits. Assertiveness, openness to change and an optimistic outlook are the qualities that tend to lead to smart money choices.

But somehow, as a financial advisor I have often found the topic of financial management to be a stumbling block among women. Well, to a large extent it’s ignorance about long-term money management techniques that still prevails among them. A big part of this can also be attributed to negative emotions like fear, shame and anger which lead to knowledge gaps and anxiety. Looking at these closely, here are some of my observations.

  1. Loss of confidence – if women are not earning members or the breadwinner of their families, there’s a high probability of feeling low on confidence when it comes to making decisions about investments. There’s a self-imposed restriction of feeling that they don’t have enough of a say in larger and more important financial decisions that concern the future.
  2. Fear & anxiety – these are the big bad wolves of money emotions, and they come in different guises, often both together. Being afraid of making mistakes while trying to invest and hence, letting someone else (read the husband in most cases) handle it, is a sign of succumbing to these emotions. In such situations, when faced with money problems women tend to feel powerless and anxious of dealing with the problem.
  3. Shame & confusion – Financial illiteracy being the root cause of such emotions, women are often embarrassed to even admit if they don’t know something or feel confused about whatever little they know in parts. Owing to this, women relinquish all money matters to their husbands as if it’s part of the division of labor.  

These emotions can often deter women to overcome their confidence gap (the measure of women’s confidence in their ability to attain their financial goals or simply to have sound financial knowledge). Added to that is the lack of any form of financial education in schools. As a result of this, it’s commonly observed that women still throw their hands up when it comes to making long-term financial decisions about savings and investments.

The truth about money is determined by how we approach it, how we think about it and how we handle it. Going back to the Law of Attraction, if people constantly think negatively about money, they are bound to be plagued by money problems their whole life. But people who feel like money is something that’s within their control, they are more likely to become successful and create more wealth for themselves. Those are the people who instead of complaining about their lack of money, educate themselves about money. Financial intelligence is the basis for growing wealth.

As rightly put by Benjamin Franklin, “An investment in knowledge pays the best interest.” This would be the very basis to conquering the mental block arising out of all the negative emotions for anyone, but more so for women. A change in our financial situation starts with a change in how we think about money and that can easily be achieved if we arm ourselves with financial literacy. Understanding the basics of savings & investments (that go much beyond just FDs or LIC savings), by getting familiar with financial products and industry jargon, by talking to financial advisors to widen that knowledge base and learning how to use online money management tools are all the steps that can help women to have a view on long-term financial planning and also contribute towards making sound decisions about their future.

This financial education also eventually empowers women and teaches them not to necessarily rely on the male figure in the family for financial security. The empowerment also lends itself to having conversations around larger financial goals, establishing an emergency fund, techniques of handling the repayment of loans and so many of such important decisions. Using that knowledge to improve the current financial situation and not letting emotions come in the way is also a critical thing to note.

Emotions often work to sabotage the rationale. It’s obvious that having a lot of money can make one feel good about themself. But that feeling is fleeting. That high can lead to unnecessary and excessive spending. Instead of seeking that feeling through spending money, it’s far more important to realize that spending less on what’s not needed is the secret to creating wealth. And that realization can only come when you know at least the basics to wealth creation. Most importantly, this knowledge can remove fears, of losing money, of failure, or whatever is holding you back from making a financial plan and investing.

Emotions among many other things shape our personalities. In a critical aspect like financial planning, it’s important that women are in check with their emotions and get down to the simple basics of understanding the do’s and dont’s of it. Knowledge always helps to overcome the most negative feelings. So never shy away from stepping out of your comfort zone and learning more about what you don’t know enough of. It’s a simple logic. You’re accountable for your own financial future. Take ownership.

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Building financial immunity during the pandemic

Ever since the beginning of the COVID-19 outbreak, there’s been a gush of information about preventative measures one must adhere to, to remain safe. They are all simple and effective ways to keep the virus at bay. Something even children can follow with ease. One of the important do’s on that list being, building the immune system to stay strong. One’s immunity indeed plays a vital role here as that is what helps to keep the body’s natural defences up and fight any viruses, bacteria and parasites daily without severe complications. However, when we fail to properly take control of our systems, these natural defences weaken over time. The same analogy can be applied to our financial planning. Let us see how.

Very often these days, we come across this phrase, “We are all in this together.”. Yes, we most definitely are. The pandemic is very much an emergency, a critical one at that which the whole world is facing. It came unannounced. Nobody ever imagined what a blow this would be and nobody still knows how long it’s going to last or how much more damage it’s going to cause. Phew! We have our fingers crossed and hope no more. But the one thing that stands out is that while we are in this together, we are not in the same boat. Each one of us is in a different boat flowing through the same turbulent river. Some of us have lost our jobs, some of us are operating under pay cuts, some of us have lost loved ones and some others still have everything intact but are living fearfully every passing day. We’ve somehow adapted to all the new ways forced upon us by nature since the last six months.

As much as we’d like to have everything back in our control much sooner than one can imagine, there are still a whole lot of questions yet to be answered. However, there are some which need to be brought to the fore and spoken about just as openly as the other preventative measures. Building financial immunity is just that and equally important as maintaining physical immunity. Having an emergency fund is a marker of that among many other things. As we find ways to navigate through this crisis, the question on almost everyone’s mind has been how to ensure financial security for their family. There are two important approaches to think of – short term and long term. Short term would  involve your day-to-day affairs and long term would apply to investments made for different goals still  many years away.

Short term

  • Re-assess your budget If anything, the pandemic has made us all realize that we don’t need much to live a happy life. We can actually live well on the very basic and re-evaluate our needs vs. our wants. With restrictions on outings and travelling, we can re-jig our monthly budgets to allot a sufficient amount to necessities, be very mindful with our spending and ensure we save for a rainy day.
  • Don’t ignore your emergency The first point about saving for a rainy day brings us to continue working on that emergency fund. Now, more than ever given that the emergency has actually struck or may be looming around in one form or the other. You’re probably making use of it depending on your current situation. But if not, it’s important to keep maintaining it for any unforeseen circumstances.
  • Be practical about your helper It’s hard enough to work from home that we also have to take care of the cooking and cleaning of our house. Not having our regular helpers for extended periods of time isn’t easy on anyone. Whether to start letting them in or wait till things get better, is another confusing question. Paying them their salaries on time without actually having the services rendered is also not a feasible option for many in these times. But if it does come to that, paying them at least half their salaries (if not full), can be a temporary solution instead of letting them go completely. And if that too doesn’t seem like an option, at least pay them a small token amount to keep them afloat for a short period of time.
  • Beware of coronavirus scams Cyber crimes under the name of coronavirus are a threat in these times. Even if you decide to donate or invest somewhere with good intentions, ensure that the source is credible. Do your research, ask around, don’t transfer any money through unknown links directing you to enter your bank account/credit card details without having checked if the money is going to an authentic party.

Long term

  • Staying invested As far as possible, it’s best not to disturb any investments intended for the long term to accomplish bigger financial goals. The market is volatile and you may not be comfortable looking at prices of stocks crashing. But withdrawing your money now because of this fear might turn out to be an impulsive decision especially if you try to buy back when the market recovers. The prices are prone to be higher then. Seeking advice from your financial planning adviser is highly recommended if staying invested is not an option for you.
  • Re-balancing your portfolio If at all the first point isn’t viable for you, it would be beneficial to consider re-balancing your portfolio before you make any drastic decisions. Again, consulting your financial planning adviser could give you a clearer perspective and help you plan better. The role of diversification or asset allocation can’t be emphasized upon more than in the current times. Hence, it’s best to ensure that re-balancing involves a good mix of various investments.
  • Insurance is a must Life and health insurance should both be non-negotiable. After all, health and finances are tied in so closely. It would be unwise to not have these insurance policies in place. In fact, getting a critical illness insurance policy would provide a bigger safety net by staying one step ahead, in case of any unforeseen circumstances.
  • Pay attention to your retirement account In the midst of everything that you’re trying to set right in these times, it’s possible that you might ignore your retirement account. Ensure that you don’t do that. It’s also important that you do your best to not disturb that either if cash flow is an issue currently. A retirement account should not be mistaken for an emergency fund. Therefore, do you best to not quit it or exhaust it either.

The last several months have been testing times for each one of us. With the new normal, multitasking is redefined and anxiety levels have been at their peak. But we’ve got to remember that there are a few things that are still under our control. Taking good care of ourselves and being responsible citizens is of course, the most important one. And being cautious with our finances, understanding the do’s and dont’s about money management in these unprecedented times is even more crucial to tide through this pandemic. Safety, to a large extent today lends itself to being financially immune too. A positive mindset is another one not to be forgotten in this list. Whatever boat we might be sailing in, we will get through this together.

Stay safe!

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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