If you work hard to earn money, why not let your money earn more money?

A beginners guide to investing money Why you should start nowRepresentative image (By Nattanan Kanchanaprat for Pixabay)
Money Finance Monday, July 01, 2019 - 17:48

Managing money, making investments and savings usually sound like ‘adult’ things to do; something you want to think about after you start earning a handsome salary. You may not have made your long-term plans yet or feel that you are too young to think of retirement or saving for your child’s education. But ask any expert and they will tell you that the earlier you start, the better returns you get.

Abhinav Angirish, founder of Investonline.in, says that the very thought that you probably don’t earn enough to start investing means that you have the wrong notion about investment. “Do you remember the joy of opening a piggy bank when it felt so heavy? You don’t need to be a millionaire to start investing,” he says.

According to Sousthav Chakrabarty, CEO and co-founder of Capital Quotient, statistics show that no matter how much a person earns, it is never enough. Lifestyle expenses always catch up with increasing income. The only thing that ensures that a person is able to save money, within the confines of their current income, is the discipline of saving that they are able to put in place.

TNM spoke to a few experts on why you should invest and how you can start:

Forming habits

Rachit Chawla, founder and CEO of Finway, says that investing creates a healthy financial habit that goes a long way to help you build assets in the long run. Also, the habit will come in handy to plan your life in an organized manner. Initially, you should have short-term goals or goals that do not require a huge sum to fulfil. Later, as your investment amount increases due to an increase in earnings, you can shift to larger goals in life, such as buying a house or an expensive car, retirement benefits etc.

Beating inflation

Beating inflation is crucial to creating wealth.

“If you work hard to earn money, why not let money earn more money? Investing helps you to capitalize on opportunities to grow your money,” Abhinav says. “Investing helps to beat inflation. If you have Rs 100 today, by next year, its value would have reduced to Rs 94. You don’t want to see your money’s value going down when the cost of everything else is going up.”

Ashok Kumar E R, CEO and co-founder of Scripbox also says that your money needs to work as hard as you do. “Investing your idle money helps it grow, compound and accumulate. If you put your money in instruments such as mutual funds, it will help you create wealth that beats inflation. At a 5% inflation rate, what you can buy for Rs 100 today, you will need Rs 200 for the same expense in 14-15 years,” he adds.

Achieving your goals

Some major life expenses, such as buying a house, cannot be met without saving regularly, Ankur Choudhary, Co-Founder and CIO of Goalwise, says.

Sousthav too echoes the same opinion. “One should invest when they have goals to be fulfilled, like preclosing a loan, planning a vacation, buying a car or a house, sending children abroad for higher studies, retirement corpus, etc. Without investing, it would be very difficult to achieve financial goals,” he says.

But where to begin?

As the very popular saving advice goes, save first and then spend what you have. And this should be your gospel when it comes to managing money.

Ankur says that as soon as you get your salary, invest some amount immediately and then spend the rest. If you wait to meet all your expenses first and then save whatever is remaining, you will frequently be left with nothing to save.

For starters, it helps to track your expenses every month. In fact, there are several apps that also help you do the same. Tracking your expenses helps you have an idea on how much you are spending on what and then accordingly budget.

Cutting back

Abhinav’s advice is to cut down expenses. “If you take a bus instead of a cab, you can save a few bucks; do this for 30 days, you have a nice little sum to begin with. Once you decide to save, you will find innovative ways to cut down on expenses. Saving is earning and soon you could be on the path to earn enough to invest.”

Sousthav’s advice is the same as well. He says that there are a multitude of distractions today and learning how to control expenses in this environment comes with discipline.

Start small

Ashok says, start with an emergency fund. “It is a fund that gives you a financial cushion should you lose your job or have a medical emergency. You can park this money in liquid funds that ensure that money is accessible enough but also grows at a steady rate. Six months’ monthly expenses or more, depending on the nature of your work and needs, should make up your emergency fund. Mutual funds, in general, allow you to start with investment sums as low as Rs 1,000,” he adds.

And once you have an emergency fund in place, start investing for other short-term and long term goals in debt and equity mutual funds, respectively.

Rachit says that it is a fallacy that you can only invest when you have a sufficient amount in hand. One can start investing with a very nominal amount and one way is to do it through SIPs.

And to ensure you are investing regularly, Ankur says automate the investment via a recurring deposit or mutual fund SIP and keep the investment date very close to your salary date.

Show us some love! Support our journalism by becoming a TNM Member - Click here.