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Noufal G. K. | 5 January, 2017

Take Charge of your finance


“You can’t change your future, but you can change your habits, and surely habits will change your future” – Dr. Abdul Kalam

Do you know that an average family, retiring in 20 years, might need more than Rs 5 Cr for retirement? Lack of assured pension, skyrocketing healthcare costs and long retirement period inflated, savings required for retirement to such high levels. Traditional retirement savings like Provident Fund and Superannuation are inadequate to meet tomorrow’s retirement needs.

However, with adequate planning and enough time, peaceful retirement is possible. Not only that; other needs like home, children’s education, and weddings, all can be a reality, if adequate money is saved and properly invested. Saving and investing with a plan, will give you enough financial cushion, you will be in charge, whatever the circumstances.


“It’s not about how much money you make, it’s how you save it” – Anonymous

Savings is the foundation of financial security. Spending less than you earn, builds a surplus. This provides a safety net and leads to financial security. On the other hand, spending money you don’t have, using credit cards and personal loans, will only make lenders rich and you very poor. Living within your means and saving adequately is the first step towards financial security. So, track your expenses, pay off debt and automate savings. Your savings will build up rapidly.

Investments: why & how?

“Don’t work for money; make it work for you” – Robert Kiyosaki (Rich Dad Poor Dad)

You saved a lot of money. What do you do with it? Buy Gold? Put them in a savings bank or FD? Money loses its value due to the corrosive effect of inflation. 1 lakh today will lose half its value in a decade, if inflation is at 6%. Savings should grow to outpace inflation, so it will meet your needs. This is called investment. You may have different needs – steady income during retirement, advance for your dream home etc. Investment helps you meet those goals.

Home is Security

“Young people should buy a house. That would give a great sense of security” – Rakesh Jhunjhunwala, Indian Investor

There is no place like home. Owning one can satisfy our physical needs, our emotional needs and provide us a tremendous sense of security for the rest of our life. As a young person, when you start your career, buy a home, with a loan if needed. Home is not a financial investment and may not generate income or growth but is an essential building block for your financial life.

Income is Essential

“Never rely on a single source of Income. Investment can create a second source” – Warren Buffet

Amassing huge assets is fine but at the end of the month, you need income to pay the bills. Foods, Clothes, Rent, Medicine are all charges, you can’t wish away, by showing net worth. Cash flow is important. Your job should take care of these during earning years. Beyond that, your investments should produce a steady stream of income. In fact, your investments should produce income streams – interest, dividends, rentals etc., it will reduce dependency on your job, and freedom ensues. Cash is king. Income generation should be a crucial element of a smart investment plan.

Equity Investment is Growth

“Time is your friend; Impulse is your enemy (for successful equity investment)” – John Bogle, Investor & Founder of Vanguard

If human spirit is high with optimism, there will be Inventors, entrepreneurs and profit generating businesses. Stock market has provided, you and me, an avenue to collect a portion of these profits by owning shares of these businesses. This is called equity. Equity investment is risky but can be highly rewarding, if done right. Long term focus and buying multiple shares (diversification) can mitigate this risk. Over a long time, due to compounding, your investment can grow exponentially, well above inflation. No wonder, the power of compounding is described as the 8th wonder by none other than Einstein.

Equity investment is not easy for everyone. Patience, discipline, ability to value businesses and risk management are all essential qualities for successful equity investment. Engage a professional, if you are in doubt.

Insurance is care for the loved ones

“A man who dies without adequate life insurance should have to come back and see the mess he created” – Will Rogers

Everybody has a plan until they get punched in the face – Mike Tyson, former boxing world champion, once said. This is true for financial planning also. An unfortunate accident, critical illness or untimely death of an earning member can be financially devastating. Insurance saves your loved ones from such financial ruin. Get adequate insurance and protect them.

Don’t make the mistake of mixing up insurance and investment. They are neither adequate as insurance, nor good investments. Remember, insurance is not for you. It’s for those you care most about.

PITFALLS to watch for…

Path of successful investing has its share of turns and potholes. Safely traversing them can make the difference between a mediocre investment and an excellent one.


In this world nothing can be said to be certain, except death and taxes – Benjamin Franklin once said. Taxes hollow out a major chunk of your returns, if not planned. A bank FD interest could be taxed as high as 30%, while it could be zero for an equity investment. if held for a year. Knowledge of intricate tax rules and leveraging them to minimize taxes is essential for optimal returns. This also avoids negative surprises while filing tax returns. Taxes may be unavoidable, but do not pay a paisa more than legally required.


Managing people’s money is big business. They make money by charging obscene fees and commissions from unsuspecting investors. These fees are not obvious to investors as they are deducted under the radar to avoid questions. They could have a significant negative impact on the bottom line. Watch out for Mutual Fund expense ratios, entry/exit loads, brokerages, and insurance plus investment schemes with high commissions.


Investment involves you entrusting your hard-earned money to others. They could be fund managers, brokers, and advisors. Money can bring out the best and worst in people. Overcharging, evasion of taxes and even fraudulent activities are possible. When you engage with such people, you could lose money as well as your sleep. It’s not worth it. Take utmost care while deciding on people and institutions, managing your money. They should have the highest level of integrity, ethical standards and be trustworthy.

“Honesty is very expensive gift, don’t expect it from cheap people” – Warren Buffet


Spend less than what you earn, save, and invest it with diverse assets with long term focus and let compounding work its magic. Protect yourself from the unexpected through insurance. These are pillars of personal finance which will lead to your financial freedom. Prudent investing is not a Get-Rich-Quick program. It’s all about optimally managing your savings, in such a way; it will meet your current and future financial needs. A great investor needs patience, discipline to stick to a plan, ability to value assets and understanding of risks.

Take charge of your financial destiny, TODAY

Happy Investing!