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5 SMART tips to make more money

By HARSHAD CHETANWALA
December 29, 2020 09:24 IST
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Make the most of the income that you earn by invest the money in the right instruments.
The advantages of starting early and investing right cannot be overstated, says financial planner Harshad Chetanwala.

Illustration: Uttam Ghosh/Rediff.com

The term millennial covers an age group of people between the ages of 24 to 38 as of the year 2020.

Financial goals and therefore, advice for someone who is 24 will be very different from someone who is approaching their forties.

Here are some goals you can try and achieve so you manage your wealth better in the forthcoming year.

1. The Golden rule: Start early!

This is the rule of thumb when it comes to creating wealth.

For those of you in your 20s and about to start your first jobs, start investing your savings from Day 1.

Plan better to buy those Apple iPhones and headsets.

Try to split your income in two parts -- Investment and Expenses.

Use the money you save to invest in the right vehicle like equities that will help you build wealth over the long term.

You will have to invest less when you grow old as you started wealth creation at an early age.

If a 30 year old and 40 year old decides to create wealth of Rs 50 lakh at the age of 50, they have to invest approximately Rs 7,000 and Rs 25,000 per month respectively (assuming 10% return per annum)

So, for those of us nearing the other end of the spectrum, if you haven't started investing yet, it is time to start.

2. Harness the power of compounding

No, you don't need Thanos' glove to harness this power.

It is something your investments develop over time as they grow.

In simple terms it is earning returns on the reinvested earning of any investment.

When you start investing your savings in the right instruments and as per your risk appetite and goals -- the money you invest doesn't remain static in underlying investments (like stocks, bonds, mutual funds) it keeps growing at a certain rate till the time you remain invested.

This flows from point 1, that the sooner you start the more time you give your investments to compound and grow.

3. Curb those frivolous expenses and avoid liabilities

Sounds like advice from a bygone generation, but trust me it holds true even today.

That is something that those of us working during the COVID induced lockdown would have also experienced -- where we were forced to curb our expenses and spend only on the essentials.

I would urge and implore you to follow the same rules -- even after the lockdown -- when it comes to finances.

For the youngsters, I have already highlighted an example of curbing your excesses.

For the slightly older reader, think really hard about getting that second car or changing your car. Do you really need it. Ask yourself, can you manage with one?

Another loan and another liability is NOT something that you really want to take. T

herefore only if the need is genuine and pressing and if we have adequate firepower in the bank should we think of splurging.

This will only ensure that more of the money is invested in the right place for the right goal -- and you have enough to create wealth.

Remember in any loan or liability you take, for the first few years you will be only paying the interest. This can have a massive impact on your overall finances.

4. Equities instead of FD

When you are young and have time at your side, your risk-taking ability increases by default.

I have come across many millennials who have more than required money parked in their bank accounts and fixed deposits. Probably because they would like to play safe or either they or their family members have had a bad prior experience of investing in equities.

Everyone likes to earn more and higher, why should your investments be any different?

Would you like to earn say 4% on your investments or 10%?

Equities is one of the best performing asset classes and has the potential to give you double digit growth along with the element of risk.

This risk reduces when you give more time to your investments (the right ones) and you do have time at your end.

Banks and FDs will give you a steady state 4% to 6%. But that may not even beat inflation. It is not enough to take you to your goals.

Before you start to invest in equities please know what your risk appetite and when you need that money this will help you to get your investment and expectations right.

5. Count your blessings. And investments too

As a financial planner, I have had the opportunity of interacting with a lot of millennials, some of them have travelled from their hometown to metro cities to build their lives, their careers and their homes.

Home loans have been the biggest liabilities we have had to bear, the largest and the toughest to repay.

But they have to go for it at some stage, having an investment plan at an early stage does help them to take less burden on the liability.

Others have had the privilege of their parents or grandparents taking the effort to build it during their time and thus giving them the freedom to invest their money without having this gargantuan liability to take care of.

To them I always say count your blessings and you are fortunate since you do not have this burden to bear. But act like you do.

Make the most of the income that you earn by invest the money in the right instruments, as one of the ads says make it the 'good EMI', the advantages of starting early and investing right cannot be overstated.

These are some of the points I think investors of all ages need to keep in mind.

But for the millennials -- those of us who have almost 20+ years to go before we start slowing down, these pointers are extremely important and must be followed for a secure financial future.

Harshad Chetanwala is a certified financial planner and co-founder MyWealthGrowth, an online investment and research platform.

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