5 early financial decisions which helped me Follow My Dreams

I was never raised to be ‘aware’ about money and its ways. It was always about valuing relationships, morals, working for passion, achieving your potential’ and the like. Money was never really talked about – we were a middle class family and my needs as a child were more than taken care of– so neither was there a need to know.

It was only when I turned 18, and our family faced some turbulent times that I realized what a significant role money plays in our daily lives. The idealism of youth of ‘doing good for mankind’ was harshly washed away  and I was grappling with questions of ‘how to make money fast’ - so that we never had to face these times again. And this is when Mr. Robert Kiyosaki changed my life. His bestseller ‘Rich Dad, Poor Dad’ introduced me to the concept of financial planning and the true meaning of financial independence. Like a good student , I read, re-read ,made notes and promised to abide by these rules till forever.

With 7 years on an average salary, I managed to save enough to experience the joys of ‘Financial Independence’ – I chased my dream of becoming an entrepreneur by bootstrapping with a co-founder for 2 years. My money, my choice – no questions asked.

As I reflect, here are the 5 things I did right which helped me :

1)  Take Charge – Most female friends and colleagues of mine, even after having superb and high-paying jobs, are still waiting for ‘someone to manage this whole savings bit’. We believe that someone else knows this better – and let me not even start on the ‘I hate Math’ excuse. This is not about Math, honey. Remember how you learnt to cook just the day you got married? Yes, exactly. The day you earn your first salary, you learn to manage it. Learn it.

Earning money is not financial independence, learning how to make your money earn for you , is financial independence.

2)  Save first and spend later – How I curse online shopping! I’m blessed (yes!) to not be a shop-aholic, but yes I know it’s almost every woman’s weakness. So as a rule, take out atleast  20% of your income and park it in another bank account. Invest in a Systematic Investment Plan which auto-debits from your account – keep the date as close as the date you get your salary. Do not fall for the ‘whatever we need we will spend and the save the rest’ philosophy. That’s not going to happen. Try it.

3)  Take Risks – So fixed deposits are a girl’s best friend, right? Not always. These will typically bring you a post-tax annualized return of 5-7% ; often lower than inflation. Play it safe with a small part of your income, but take some chances of investing in equity funds or company shares to get that extra return.  Learn about equity mutual funds and blue chip shares. In the early 20s and 30s, based on liabilities and financial obligations, one can invest 30-40% in Debt and rest 70-60% in Equity.

 4) The Secret Stash – One advice I follow till date,  given by one of my dearest aunts just before marriage, was about ‘The Secret Stash’. Make a long term investment or park your money in an account which you cannot access on a daily basis. And don’t tell anyone about it. Not until an emergency arises. At first, I felt outraged at the thought of ‘hiding’ money information from my husband and family. But as I learnt, there were times when we wanted to buy a bigger TV or a fancier gadget, but because the secret stash was out of sight, we never really dug into it. At this one time, we had a sudden tax liability on us – and we were stumped on how to pay it up so soon without taking support from parents’, family or friends. Yup, that day the Secret Stash did its job. Not only did I amaze my husband by bringing the cash to the table within 24 hours, I won over his unrelenting trust with managing money.

5)  Remember the PF – Oh how many people I know forget about the PF – either to transfer it or withdraw it. This is your investment – don’t miss out on it. PF is the one and only form of social security built for the working Indian Middle class enforced in most organizations. It’s the one evident example of the compounding effect. Giving out those tiny bits every month from your salary for years – and then you withdraw a handsome amount which is sure to make you jump with joy. Don’t forget about it – withdraw if you’re going to be out of work or transfer it without multiple reminders from HR. This could be the capital you need to take the first step towards your dream.

Once you know just the basics of how money works, there will be a newer way you see financial independence. It won’t be about the monthly pay cheque – but about making these pay cheques fund your dreams. Because after all, money is just a means. Not the end.