How to put an investment plan in place
Posted by: Arti Bhargava on Dec 04, 2017, 12.31 PM IST
Rajiv has recently got married. His problem is that though he earns well, he is unable to save any money. He and his wife enjoy frequent outings, shopping and holidays.
While Rajiv has every intention of saving and investing some part of his income, at the end of the month, he is either left with too little money to invest or there is some money lying idle in the savings bank account.
He can't bring himself to make a financial plan and stick to the decisions associated with it. He always finds reasons to avoid doing that. What can Rajiv do to overcome the problem he faces of not being able to put an investment plan in place?
Inertia when it comes to making investment decisions is a common problem faced by many people. For such people, the best way to ensure that some portion of their income is saved and invested is to make savings automatic. This does not require them to make frequent decisions or choices on where to invest and how much to invest.
There are various ways in which Rajiv can put his saving and investment exercise on auto mode till such time he is willing to give it the time and attention it requires. He can use a salary deduction option with his employer, who might agree to deduct a fixed amount from his salary and use it make an additional fund contribution towards NPS, an insurance premium, or a mutual fund SIP.
He can also give instructions to his bank to move money from his salary account into any investment avenue, including fixed deposits, on a given date. All of these options require Rajiv to create a mandate for investing a fixed amount from his salary, before it is available for spending. After that it goes in to automode and creates an investment portfolio for him, requiring minimal action or decision on his part.
Since Rajiv realises the need to start investing, he will be ready to make the one-time effort. The low involvement required from his side to keep the investment going will suit his current reluctance to participate actively in his investment activities.
However, it can go on till such time he is ready to commit to a financial plan that lays down his saving and investment requirements given his financial priorities. However, he must realise that this is more of a stop-gap arrangement and he needs to get more serious about setting a plan, budgeting for it, investing the surplus and reviewing them periodically.
(The content on this page is courtesy Centre for Investment Education and Learning (CIEL). Contributions by Girija Gadre, Arti Bhargava and Labdhi Mehta.) This article appeared in Economic Times dated Dec 04, 2017, 12.31 PM IST