Why do we find it hard to choose from so many different investment options?

There are about 1500 mutual funds to choose from.

The proliferation of financial instruments (it is a contract to buy and sell stocks, bonds, mutual funds etc) such as mutual funds, exchange traded funds, and many others is rooted in the need for diversification, risk management and ability to meet the diverse investor goals.

Imagine, if you only had five financial instruments to choose from. I'm pretty sure, one of you would have created a sixth one that would satisfy a unique need and that would have opened up new options for others as well.

The financial instrument like a mutual fund promises to satisfy investor need and therefore, if you are an individual investor, it makes a lot of sense to look at it inside-out instead of outside-in.

Steps to Define Your Investment Strategy Using the Inside-Out Approach:

1. Start from What You Know 🧠

Begin by reflecting on your current financial situation and knowledge about investing.

2. Define Your Investment Goals 🎯

Ask yourself: Why do you want to invest? What is the purpose of this wealth-building exercise?

3. Make a List of Your Investment Goals 📋

Identify the reasons for your investment. Here are some examples:

• Emergency Fund 🚑
• Marriage 💍
• Starting a Business 💼
• Buying a House 🏡
• Paying Household Expenses 🏠
• Medical Expenses 💊

4. Match Each Goal with Financial Instruments 🔗

Align your goals with what different financial instruments promise to deliver:

• Emergency Fund = Safety (minimize risk)
• Retirement = Growth (long-term investment)
• Medical Expenses = Protection (insurance for unexpected costs)
• Household Expenses = Cash Flow (daily financial needs)

5. Estimate Your Needs 💰

Make a best guess of how much you need to satisfy each goal and when you need it by.

6. Calculate Your Monthly Savings 📈

Do the math to determine how much you need to save each month to reach your goals.

By following these six steps, you can choose the mutual fund that is best suited for you—tailored to your unique needs, rather than simply following what works for someone else!

Now it's your turn! 🤔Take a moment to reflect on your current investment strategy. Here are a few questions to consider:

1. Are you aligning your choices with your personal financial goals? 🎯
2. What challenges have you faced in selecting the right financial instruments? ❓
3. Have you discovered any strategies that have worked well for you? 💡

Share your thoughts in the comments below! 💬 Whether you’ve found a method that works for you or are still navigating the sea of options, your insights could help others on their investment journey.

#personalfinance #inside-out #investmentstrategy

Suja felt excitement and panic as she sat across from her friend Vani at their favourite cafe. With her paycheck deposited in her account, she was determined to start investing before the end of the year. She wanted to start 2025 on a powerful note.

"Vani, I don’t know where to start," Suja confessed, sipping her favourite beverage. "There are hundreds of mutual fund options out there, and everyone I know is investing in equity funds. My friends say it’s the only way to get rich, my colleagues are always discussing their double-digit returns, and even my parents keep telling me not to miss out."

Vani nodded sympathetically. "Well," Suja sighed, "I want high returns so I can fund my post-graduation in the US, travel to Europe in April, and buy an iPhone Pro in June. I’ve found the best-rated fund (with a 5-star rating) and I’m seriously considering putting my money into it.”

Vani asked. "What makes you think a five-star mutual fund is the best option to achieve your goals?"

"Isn’t it why it’s rated five stars, it must be good, right? shrugged Suja,

Vani reminded, “A five-star rating is a useful place to begin but not the end goal. Here’s what you need to know.”

Methodology Differences
"Imagine two movie critics reviewing the same film. One person rated the movie five stars for the acting, and the other gave it three stars because they didn’t like the plot. Mutual fund ratings work the same way—every agency looks at different factors. For example, one might prioritize past returns, while another focuses on lower expense ratios or riskier funds.”

No Guarantee of Future Performance
“A five-star mutual fund tells you how well the fund performed in the past, but it can’t predict the future. Markets change, and so do fund performance."

Goals Matter
"Your goals are unique—saving for post-graduation, travel, and an iPhone Pro. But your friend might be investing for her retirement which is 30 years away. A five-star fund that works for them might not align with your shorter timelines. You need a fund that matches your specific goals and risk tolerance."

Understanding Risk
"Just because a fund is highly rated doesn’t mean it’s risk-free. Think of it like buying a fancy sports car—it’s great for speed, but not the best choice for a family road trip. Similarly, a fund might deliver high returns but come with high risk in shorter duration that may not deliver the returns you want.

Suja leaned back in her chair, processing what Vani had said. "So, a five-star rating might be a good place to start, but it’s not the end goal," she said thoughtfully.

"Exactly," Vani replied. "Investing is personal. The real end goal isn’t just picking the ‘best’ fund—it’s choosing the right one for you. Let’s start by defining your goals, understanding your timeline, and figuring out how much risk you can take."

"That makes sense," Suja nodded. "Where do we begin?"

"We’ll map out your goals and shortlist funds that align with them," Vani said. "It’s not about chasing stars—it’s about creating a plan that works for you."

What Do You Think?

Have you ever felt overwhelmed by investment decisions or chosen a mutual fund based on ratings alone? What was your experience like, please tell me in the comments.

P.S. This is an attempt at simplifying personal finance concepts for beginners. I’m using a conversational storytelling style to do this. Do share it with people who you think will resonate with it or want to learn from it.

Meet Daa Daa, he lives in Bengaluru with his parents and sister, Dee Dee.

Daa Daa is the youngest member in the family but is cool, calculative and cautious about everything, especially about money.

This is so because, his sister Dee Dee (who is cool and awesome, ofcourse!) lives for the moment and loves her family to the fullest and of course her brother a lot.

Dee Dee is an engineer who started working 6-months back and Daa Daa is a musician and a nursery school teacher. Dee Dee buys the latest new gadgets in the market and gifts it to Daa Daa who complains that he is being pampered (who complains about being pampered 🤔)

Meet Sa Sa!

Dee Dee’s friend Sa Sa finds out the latest gadgets to buy and loves to keep everyone (his audience) hooked on his recommendations. He runs a Youtube channel and has a lot of subscribers.

Sa Sa meets Dee Dee for coffee and tells her about his latest find, a brand new phone that has these amazing features and is available at a 20% discount. Dee Dee is all ears 🤩😍

She desires to buy it but soon realizes that she is short of cash (digital cash 🤑 of course!). She says, “I wish I had the money to buy this phone. I’m lost now, what do I do?”

Sa Sa comes to her rescue.

He tells her to defer the payment using the No-cost EMI option available at checkout on the ecommerce website. He shows her how to select the option and convert the payment into easy installments. “It's just one click away, he explains”.
Wow wow wow, this is amazing says Dee Dee.
She is smiling all the way 🥰😃

She asks him, “How do you find these amazing things Sa Sa?”
He says, “I’m want to help my friends and I find these super useful hacks and apps and all things tech, I’m so satisfied when I see you happy”.

Dee Dee wonders out loud, “ This is too good to be true, right. It says EMI but this is not a loan right?

Do I have to pay interest?
What is No-cost EMI?

Sa Sa replies, “That’s the best part! No interest, it’s interest free - you just divide the total amount by the number of months, say 3 months and pay it monthly.”

Dee Dee says, “I hardly have any money left in my bank account by the 15th of every month, won’t they ask me how I will be able to pay this back?”

And I don’t even have a credit card.

Sa Sa explains, “This is Buy Now Pay Later plan and is simply buying now and paying in several installments and they are made for people with no credit card or credit rating and who are not eligible for any other loan.”

“For example, these are for small purchases and you can use it to defer paying your grocery bill, cab rides, food takeaways and orders, gadgets of course and even travel.

A lot of payment platforms, digital wallet operators, and even major e-commerce providers have built a BNPL offering on top of their existing services.”
Dee Dee remarks, “Wow, this is so cool 😍”I’m so glad I met you today.

I’m ordering the phone right away. 🤔 You know what, let me make that two. I’ll order two phones, one for Daa Daa as well.

I’ll buy now and pay later.

Daa Daa joins them and overhears their conversation. Nodding thoughtfully, he wears his awareness lens.

Daa Daa begins,  “Buy Now Pay Later” is a point of sale product and is not new at all. In India, typically when you buy appliances in physical stores, there are representatives from Bajaj Finserv offering you to pay in installments.

Another relatable example is your neighborhood kirana store (grocery store), milk store, and local tea stalls where you settle the bills once every month. These are truly interest free deferred payment and the friendly grocery store owner would not penalize you or charge a late fee if you miss a payment.

At the most, he/she will just stop allowing you to buy anything till you settle the dues.

The same model is adopted across digital e-commerce and other stores but with one major difference. Should you miss the payment, you will be charged a late fee and penalty and your credit score (whether it existed or not) will go down.

A credit score decline affects your prospects of taking a loan for buying a house, or funding your higher education etc in future.

A number of such loans (BNPL) adds up to engulf your monthly income and drag you into the debt well (that is deep and is hard to climb back up).

One way to keep a tab on your debt level is to find out how much debt you repay every month - find out total amount of income you earn each month

Find out Debt to income Ratio = Monthly Repayment of Debt divided by Monthly Income

A ratio >1 means you are over-indebted and aim to maintain this ratio below 0.3

BNPL transactions increased a lot during the pandemic.

The participation of the young population in the digital e-commerce transaction, digital natives and aspirational consumers who are driven by short term needs dominate the market that currently stands at 250 million Indians.

In comparison, only 67m people have credit cards.

Excess credit is not yet been a problem in India and this graph tells you how much personal debt we owe compared to other countries.

Source: BusinessToday.in

The low credit penetration to the informal economy with sub-prime/ first time borrowers and reluctance of traditional banks to lend to these small borrowers with low or nil credit history rapidly increased the adoption of BNPL schemes across service providers.

On the demand side, consumers are increasing adoption of BNPL schemes.

There is a huge uptick in demand with more than 54% of the consumers surveyed by YouGov (global market research and data analytics company) said that they tend to make impulsive purchases using BNPL.

And, 49% of consumers feel financial matters confuse them 🤔

On the supply side, there is a huge opportunity for growth in BNPL transactions with Redseer research estimating that BNPL transactions are now at $3-3.5bn in India and is expected to grow to $45-50bn in 2026.

All companies are digital lenders nowadays and they see this as a huge opportunity for them to tap into. Rightly so, they want to offer innovative products and services that will help build their customer base and make it profitable for them as a business.

What can the buyers do?

“Caveat Emptor” - which means “Buyer beware”

The buyer needs to wear the awareness lens to be able to see what is best for him/her given his/her context

Daa Daa thinks out loud, “What is one thing you can do to keep personal debt in moderation?

1. Fix Limits on transactions - For example: limit spending on coffee to rupees 150 per week, spending on gadgets at rupees 1000 per month and clothing and entertainment at rupees 500 per month and so on.
2. Implement the "Ice Glass" method as a method of cooling off period for large purchases
3. If you surpass these limits, select penalties like uninstalling the ecommerce account from your phone, tax yourself for spending and transfer money to a charity your friend chooses.
4. Trigger an email automatically once you exceed your limit that reads as follows: (have to find out ways to do this) -

Dear Daa Daa,

This email is to draw your attention to the fact that your sister, Dee Dee, who is generally an upright citizen has exceeded her spending limit on gadgets of rupees 1000 by rupees 2500.

Best Wishes,
berupeewise team

Inspired by ideas in Dan Ariely's Predictably Irrational

Dee Dee agrees to set limits on transactions and review these limits periodically. Sa Sa signs off with a lot of insights into BNPL schemes and promises to do more research before he recommends products to his subscribers.

Did you know about BNPL schemes? How aware are you? How do you keep track of your discretionary spending?

If you had an option to buy a new phone at the best offer, would you use the BNPL option. If yes, why? If no, why not?

Want to read more stories, subscribe to my newsletter here

In our day-to-day lives, our ability to spend on needs and wants determines our sense of financial wellbeing.

We need to earn income to spend and with time when our earning capacity reduces, our assets contribute to the difference between our income and expense so that our financial wellbeing does not suffer.

The asset will contribute to the difference only if it provides some value. Therefore, the choice of asset you wish to build is critical when you are considering if it is valuable or not.

The definition of an asset is, "It is a store of value that can be drawn and used."

The same is true for the human asset, especially now when the knowledge worker uses her skills, knowledge and attitude to generate income.

Assets are not expected to lose value but that is rarely the case. Even human asset loses value and a conscious attempt is required to acquire sustainable value.

So, how do you do that?

To provide sustainable value, you must keep upskilling yourself. This is how my graph was looking.

This meant a sharp focus on learning new skills that will help me provide value to others and create meaningful relationships on the way.

Here is my story:

The ability to sustain and create value improves your chances of earning more.

Often, in our journey of building assets, we take a lot of twists and turns, we fall and rise and ultimately reach the door of freedom 🚩(hopefully by the time we retire), so that our assets come in handy to meet the shortfall.

Just like a baby learning to walk, falls a lot of times but keeps getting up and never gives up.

If building assets is such a no-brainer, then why do we struggle so much?

We expect the assets to not lose value at all. But that's hardly the case. The assets rise and fall but not all of them do so at the same time.

Here is a graph that shows the price fluctuations in Gold vs Nifty from 2008 till date.

There are trends we see in the way the assets behave and therefore, the idea of creating long term wealth involves identifying that some assets may lose value but not all of them behave the same way all the time.

How do you build your assets?

Invest Smart

is the most common advice you get when you start earning.

You also hear words like, "If only I'd done the work..."

Many of us live in regret for not taking the job or switching a career, or doing something like spending too much, not saving too much, and so on.

In his book, The Power of Regrets, Daniel Pink talks about these regrets as Foundation regrets. And he uses the fable "The Ant and the Grasshopper" where he says that the foundation regrets arise from our failure to take action or not making the right choice especially when we choose an easier path just as the grasshopper did over a long-winded path that will serve us better in the long run.

One of the examples of regrets people have:

Lack of financial foundation prevented a 46-year old from "having the space to live life."

To give you an example, take a look at the visual below:

In this case Person A earns ₹1,50,000 while Person B earns ₹15,00,000 and person A has done everything she could to curtail her expenses and ends up saving 70% of her income that comes to ₹1,05,000.

If Person B also decides to save the same amount, it would only be about 7% of her income. Even though Person A is saving a lot of money as a % if her earnings, she could end up spending that on meeting her goals and feel that she needs to save more.

While the Person B who earns ₹15,00,000 will have a little more room to spend on things she needs without a lot of regret.

Earn more is not what you hear often. I did not definitely.

Here is why it matters. Irrespective of the stage in your career, how much you earn impacts your savings and your ability to secure a stable future.

So, what do you do now?

Person A puts in some extra effort and begins investing in reskilling herself, for example, going for a higher education in a subject of her choice, taking a short course that will help her practice and learn better, choosing to switch her career and doing everything it takes to grow in her career.

In the initial years of your career, or when you are starting out after a sabbatical or if you are stuck in a stagnant job, the first step is to identify that you are stuck, the next is to not blame yourself for your inaction, and the third is to examine the regret from a lens of extracting key lessons from it that can guide you in future.

This is a true story for many of us. We focus on earning more return on our investment when probably we should have focused on earning more by investing in ourselves.

Charts like these that show how much your money grows in 30 years. It makes a classic case for saving money now so that you can reap the benefit in future.

It clearly shows that money when saved and invested regularly grows and compounds over time.

For example: If ₹6000 can grow to ₹1 cr in 30 years, you can imagine what will happen if you were to invest a lot more, say ₹25k or ₹50k?

However, in reality, we don't begin early, we don't stay consistent, we break compounding, we don't track our savings, and we are not able to get a consistent return.

In this example, a return of 10% is assumed. If you reduce that to say 8%, the numbers will change. Its very easy to do this on paper, in reality it makes a huge difference to our corpus.

And, not all of us only care about building a corpus.

There are other things we care about. It could be a vacation, a wedding or an experience you want to enjoy. And, we all know that these things cost a lot of money.

Its one thing to say we work to earn money so that it can be put to use for our big and small decisions. But, are we so conscious of where our money is going?

We are constantly making money decisions. Here is an example:

It says convincing you is a piece of cake :)

When every marketer out there is trying to nudge you to make choices that benefit him, relying on just your willpower will not do the trick.

What do you do then?

And there is enough being written about how emotions take over and influence our choices. And, that is something the marketeer is learning about us.

If you have come so far, I'm assuming you want to know where your money is going?

Again on paper, its very simple to do. Won't take you more than 5 mins.

Add your income, subtract your expenses and the balance is your Savings

Income - Expenses = Savings

In reality, it feels like this:

Do you have a fair idea based on mental calculations that you save this much every month? And want to know how much is that much 🤔

And would like to get more insights into your spending where you intend to get better at allocating your money or budgeting.

For those of us who want to find out if we fall in rectangle one or two, here is a simple and easy way to find out.

It will take about 30 or even 60 minutes depending on how many wallets, bank accounts and credit cards you have.

First step is to take a deep breath. And get yourself your favourite beverage. It might help if you can download your bank statements - all savings accounts and credit cards, wallets and purse (literally digital and physical) and see if there is any cash in your wallet.

Step 1 - Categorize your expenses. For example - Groceries, Rent, Fuel, Hobbies, Shopping for clothes, Eating out, Taxes, etc

Add subcategories - Depending on how granular you want to get, you can assign sub categories too.

Step 2 - Input transactions

Step 3 - Set limits, if you want to

Step 4 - Get Insights

Download this sample that will help you get started.

Once you know how much you are spending and on what categories, it will help you make changes and increase or decrease your spending across categories.

You only need a tracker. Some people prefer an excel sheet while others prefer pen and paper.

What do you prefer?

This is simple enough and we all know how to do this. If we know how to do this, what gets in the way?

Our ability to do this consistently gets in the way.

As we have multiple things to do in your professional and personal life, this can get quite overwhelming.

Here is one solution that will help you track and not feel overwhelmed as well.

Where is the money app simplifies tracking for you

This is a personal finance tracker that helps you track your expenses on the go and get insights into your spending.

How does it work?

On a 60 min call, we can setup your base app and categories, sub categories and frequency.

The app can be added to your home screen and you can input transactions on the go into it. The app gives you insights that will help you find out where your money is spent and take timely action.

The frequency of entering transactions can be customized. The benefit is you will know your financial status at any time on the go.

Write to me at sreelakshmi@berupeewise.com if you want to get access to this app.

Money lessons are learnt at home just like other crucial life skills such as love for nature, eating a balanced meal, growing your own plants, learning about your body, and so on.

These skills are picked up by children based on observation and behaviors they observe early on in their lives. It is show rather than tell and even though many of us are not aware, there is so many cues they pick up as they grow up.

Several research reports on developing financial capability have shown that there are three factors that drive financial behavior,

1. Knowledge of financial products and concepts about money.
2. Financial inclusion, engagement and access to money and these financial products.
3. Values and attitude towards money such as saving, borrowing, spending, investing, understanding your financial position, and so on

Ability or knowledge of financial products and concepts is not a driver of behavior with respect to two key capabilities - day-to-day money management and active saving behavior.

This means, when it comes to managing your money, access to money and your attitude towards money has a say in your behavior.

Money mindset is picked up early on in your life. It is influenced a lot by how your parents handle money and money decisions. For eg: were they anxious when money runs short. They feel their money situation never improves, or were wary of borrowing, nonchalant about borrowing implicitly impart attitudes towards money.

If you are self-aware and independent, you will either unconsciously follow their footsteps or consciously stray away from what they would do.

And this depends on what you value and who you are as a person? And for sure you will evolve over time.

Teenagers and young adults are digital natives and hence they do have access to smart phones that are now used for day-to-day transactions, for example: whether it is booking a cab, ordering food, or buying clothes or gadgets.

Therefore, parents have to involve them in money conversations and decision making such as healthy meal choices, being mindful about what they buy and consume whether it is clothes, food, electronics, or gifts. Engaging family conversations involving your teenager will help immensely in this aspect.

One tool that can be introduced early on is to track their expenses and income. As simple as it sounds, it has a profound impact on inculcating healthy money habits in children and adults alike.

A highly customized and personalized expense tracker that helps you categorize expenses and income, derive insights on your spending and correcting if you are not on track is the need of the hour.

Here is an example of a personalized expense tracker that will help you do just that. It includes an e-book that explains and guides you along as you put it into practice.

To pre-order your copy, please visit here.

Every long term investor needs to know these three things.

First step in long term investing is to take a portfolio view of your stock investment

If you are a long term investor, the first thing you need to remember is that you don't make money on individual stocks, it is about making money on a portfolio of stocks.

You might have bought the stock when its price was very low say Rs 50 and it is now Rs 5000, you feel elated and fantastic at your stock selection skills.

One question to ask is - How much money did you invest in that stock? - was it Rs 10000, or about a lakh?

And ask how much difference did it make to your wealth?

This is because you are managing an entire set of stocks where some of them are making money and others are not.

Find out what is working, what is not and what do you want to do about it

Knowing cycles is the second important step to become a long term investor.

The next thing is when you are building a portfolio especially for a longer term, and that has good quality stocks in it, you must understand that there are many over arching external macro-economic factors that you will be dealing with.

When there is optimism, you can feel it everywhere. The environment will be shouting out one thing, everything is going to be great. It will look like every business big or small will succeed, everyone is making plans for the future with a lot of optimism, businesses are expanding, borrowing more, consumer sentiments is improving, and they are sharing projections for a bigger better world which gets reflected in the stock prices too.

How will you differentiate which one of these businesses will succeed in future to make you a millionaire?

Its not easy to answer that question.

It becomes even harder when things begin to collapse in its own weight as we all know that every business that is set up will not become successful. For every successful business, there are many others that are not doing well.

And it becomes obvious when of all the optimists, only a few of them can take the market falls and the bear phases of the stock market.

To become a long term investor, you have to be present in the market for atleast one cycle - when things are going bad and get better again. Only we don't know how long this will last.

So, a long term investor has the courage to buy stocks when the markets are down and hold yourself back when there is too much optimism to book profits and exit.

Time in the market is more important than Timing the market

Key thing over here is to understand how to behave in the crowd

The next step is realizing that you are not alone here. You are always in a group and influenced (most of the time unconsciously) by what others are doing and making decision constantly that are biased.

You are constantly comparing and doubting your narrative as you think that the crowd knows something you may not know. The group you are part of has different kinds of investors, some of them are informed investors, speculators, and there are also people who are selling the stock not because they have a view but they want the money now.

And you have no way of finding out their motivations to buy and sell stocks.

How am I going to manage my money in the context where different people behave differently. This definitely calls for a lot of work on your own emotional intelligence.

So, now that we know about some of the key building blocks of a long term investor, what do we do now?

If you want to invest for the long term, but don't have time, there are options available in the market that will help you build a portfolio.

These are managed portfolios - also called Passive investing.

For example, BSE Sensex consists of 30 top companies in the market. These companies are the largest, biggest, most profitable, well-traded and this index is available to you as a product in the form of Exchange Traded Funds (ETF) or Index Funds (Mutual Funds).

You can simply buy the index.

How will this help?

When the index was initially constructed there were companies that do not exist today. And why is this so? This is because, the index is a dynamic portfolio that throws out companies that are not doing well and brings in others that are doing well, based on their market capitalization.

The next best choice is to ask the fund manager to do it where you buy an equity fund which is an actively managed fund.

A fund manager constructs a portfolio and he looks at stocks, business cycles, investment strategy and assures you that she will perform better than the index. The fund performance is driven by the fund managers' stock picking abilities, his research, monitoring, managing and deploying the funds into businesses that are growing and performing well.

A fund manager requires a fee to do this for you. If you are willing to spend some time selecting a fund that is consistently performing better than the index and its peers and pay some fee, you will be able to invest in Mutual Funds.

There are portfolio managers who are skilled in creating these portfolios for you and managing them for a fee. A few years back, this facility was available only if you have more than INR 25-50 lakh to invest and it is called PMS (Portfolio Management Services). The Portfolio manager charges a percentage on the Return you earn on your investment.

Smallcase is an alternative of PMS that is offered to small retail investors even if they do not have so much money to invest.

There are investment advisors and portfolio managers who create portfolios that you can invest in where the minimum investment is much lower.

Some of them charge an upfront fee to give you access to their portfolios while others offer it for free as well.

As a long term investor, you have many options in the form of ETFs/ index funds, actively managed mutual funds, smallcases, PMS and so on. You can make a choice or invest in any combination that works for you.

Its easy to participate in the equity market if you made it simple.

How do you invest in equity markets as a long term investor?

Image Credits:

<a href="https://www.freepik.com/photos/food">Food photo created by stockimagefactorycom - www.freepik.com</a>

<a href="https://www.freepik.com/photos/background">Background photo created by stockimagefactorycom - www.freepik.com</a>

If you are one of those fastidious savers who find it hard to use your savings when you need, read on to find out how to do it without feeling guilty.

In his book titled, “Die with Zero”, author Bill Perkins introduces the concept of how you can spend money on experiences that will pay you valuable memorable dividends.

When everyone else is talking about delayed gratification and financial advisors advising clients to look at how they should be saving more and not spending it mindlessly, this book brings in a totally different perspective where the author talks about using your savings to experience a fuller life and dying with zero or very little left.

This is such a scary proposition for most of us and we are definitely wary of this as most of us are working towards a single goal of being able to save enough money so that we can last with what we have and also leave some for our kids or dependents after we die.

Do you also hesitate to spend money or feel guilty?

Do you find yourself believing that using your money to buy what you want is sinful?

Do you catch yourself from buying something you think you need by delaying gratification only based on the amount it will cost you now?

For example, I am an avid reader who has started reading a lot online these days. I wish to buy a kindle for reading but often put the purchase away convincing myself that I can always use other devices such as a smartphone, laptop, etc for reading. We all have our moments where we feel foolish when we deny ourselves these experiences.

Do you consider yourself great at self-discipline if you are able to guard your money, protect it, hoard it even, keep it safe etc?

Do you live in denial of your simple needs?

The primary reason for not using money is fear that we will outlive it and accessing our savings is considered a big no-no for most of us.

Here are some examples I have come across:

• For elders, it is not able to figure out the threshold that will make them sleep well at night.

For example - even if they have about INR 1 cr in savings and investments and a medical insurance policy, they want to keep the principal intact and only withdraw the interest which is meagre these days and not sufficient to fulfil their day-to-day needs

• For others, the fear of salary cuts, not finding a well-paying job and so on.

They deny themselves of their hobbies or wants so that they can save more for future

I’m not saying that you should not be worried about your expenses.

Taking charge of your finances means your ability to say yes to things that matter to you and no to things that don't matter as much.

Looking at your spending as a healthy exercise to learn about your money mindset and taking the necessary action will be immensely helpful.

Here are some ways to make use of your savings that you have accumulated over a period of time:

1. Take a loan on your fixed deposit when you need to fund for a lumpsum expense.This loan is not as expensive as a personal loan as the bank has your money as collateral
2. Create a budget for expenses that are unusual but necessary for improving your life. For example, plan for personal growth or vacation when you are doing your annual budget planning
3. An unusual windfall in the form of bonus, dividend income, gifts from family and friends or a tax refund calls for some indulgence. It could be an activity or a celebration that will make it memorable and interesting for you
4. Bring in some flexibility to your spending so that you stop feeling guilty. *for example, set up automatic withdrawal in an account you use just for fun or indulgences.

What are some of the strategies you would like to adopt for utilizing your saving to lead a meaningful life?

Understanding your relationship with money is far from easy. Here is an attempt to simplify it for you (underline the word attempt).

As the name suggests, personal finance is highly contextual and personal. There are no universal laws governing personal finance. But a little bit of effort is enough to get you started on your journey of self awareness.

Financial wellbeing is crucial for our overall wellbeing and so we must take care of it.

When we do start looking at our own financial wellbeing we notice certain things that are unique and contextual to us.

Let's therefore start with finding out a little more about ourselves and assess our financial wellbeing

Here are some questions to reflect to find your financial wellbeing score:

After you answer these questions, the next step is to score it.

For Questions 1, 2, 4 and 8 the score is Completely - 4; Very Well - 3; Somewhat - 2; Very little - 1; Not at all - 0

Take a piece of paper and mark your score for questions 1, 2 and 4

For Questions 3, 5, 6, 7, 9 and 10 the score is Completely - 0; Very Well - 1; Somewhat - 2, Very little - 3, Not at all - 4

Mark your score for these questions as well.

The next step is to add your score.

Your financial wellbeing score is the total score after adding all your responses.

What does this mean?

Higher the better, a higher score is preferred. That said, here is your first step towards being financially aware.

Now, take a moment to reflect on this exercise.

How are you feeling now?

Knowing your financial wellbeing score is a good place to start. If you think it is good, you could improve it. If you think it is bad, you can still improve it.

Building Wealth

Building Wealth is an aspiration or goal for many of us. Is building wealth the same as financial wellbeing?

How does it impact your financial wellbeing?

Is building wealth the same as being wealthy?

We are a new generation of people who want to build wealth as we find that as most or atleast some of our basic needs of food, shelter and clothing taken care of, we must move up the Maslow's pyramid where we seek other bigger better things for us.

Building wealth is like building a house; we begin with a strong foundation, add pillars and then finally add the roof.

Here is an image or visual to explain this:

Here the foundation is the funds that will take care of our emergency needs and the fact that we are able to earn and save more. It essentially means we need to start building wealth as soon as we start earning.

For all the people who are starting a new job or are early in their careers, this is a big realization and a starting point. As with building a house, it takes time. You cannot build wealth overnight. Therefore, starting early is the key.

The next step to building wealth is not only saving but also investing your savings.

Income - Expenses = Amount Saved

Saving is the first step.

Investing your savings in assets (like Stocks, Mutual Funds, Real Estate etc) generates more income and builds wealth for you.

These are the pillars of your house. The stronger the pillar, the stronger the house.

The roof is what covers your house and these are those things that are needed to ensure that you keep earning well.

I call it Self-care, learning and earning. Investing in continuous learning will help you become a better version of yourself and investing in books, courses, your health and mental wellbeing makes you stronger from inside.

Investing in your hobbies and activities that helps you pause and reflect on what is important for you makes it even better.

This is your roof that will ensure that your house will be protected from all the external impacts like sunshine, rain, thunder, etc.

I'll leave you with a beautiful image of a house that you can also build and we will look at how to do that in the upcoming articles.

My children do not want to learn personal finance because they think that they can learn something so practical only when they can apply it in their day to day life.

This is not possible until they start handling money by themselves. They feel that even if we tell them they can handle money, we always have a say in where they are spending that money.

Are we as parents prepared to let them handle money on their own?

When I started a financial literacy school, there were a lot of parents suggesting that I must teach kids about handling money.

It was a no-brainer at that time as I thought it was a great idea and began conducting experiments inhouse. To spice things up or to get some buy-in, we told our kids that assuming that they earn 5k every month, they can choose to spend the money wherever they want.

One was meticulous in planning and never really spent any money. He would always weigh the pros and cons and say, "No, I don't need this now."

The other one was constantly looking around for things he wanted badly and always chose big ticket purchases and would find himself in debt for the rest of the month or even the next few months.

Both of them made their own choices but still felt we as parents had a say as they were not yet earning anything.

That's when we realized that we were far from making them independent and they were obviously not enjoying the partial independence.

We learnt our parenting lesson that showing rather than telling makes more sense.

Now, let's come to the point of whether we need to teach kids about money as they now know addition, subtraction, multiplication and division.

Kids these days are very busy and they don't have the time to learn one more thing from us parents or educators. They are biased towards experiential learning and till they continue to live with us i.e, say their 12th grade, they are going to make fewer money decisions on their own.

Just like other things, I feel that they will get to handle money when the time comes and most of them would have developed some of the skills as they would have seen you handle money. Either they learn and accept that it is a good thing to do or they know that it is not the way they want to handle money - they learn from you and your mistakes and this is where as parents we need to show rather than tell them how to handle money.

The responsibility is on us but if there is friction then the way the child shapes up will be based on the environment he or she is exposed to.

The right time to talk about money is when you have enrolled them into a college and they are now going to live on their own. You have to trust that they will handle their money better and will develop their own systems based on trial and error.

I am writing this article with one thing in mind. There are some things that can be taught in school and by all of us. But a few things like money have to be experienced and learning from our own experience is something that cannot be replaced.

The other thing is why do we want to teach everything we know and give our children a pre-decided plate that has a bit of everything. The child will find it boring and would want to learn things on their own.

The question still remains as I find most people saying that I wish I knew about finances when I was in my 20s, I would have handled it better. If you had access to that information, would you really want to learn it in your 20s or would you rather experience it for yourself?

Income is what you earn as salary, interest, dividend, stipend, gains, inflow and so on. The obvious advantage of multiple streams of income is to earn more.

Who wouldn't want to earn more but we are discouraged as kids (while some of us) to think about money and it becomes difficult for us to think about earning more when we actually do start working. Even so, most of us depend on only one source of income, i.e. our salaries. But lets face it, salary is not the only way to earn more.

Are there other ways to earn more?

Of course there are and the first step is to find out "why do you need multiple streams of income?"

Knowing your why will help you stay on track and set the context clearly.

An example can be "I want multiple streams of income so that I can retire in the next 10 years."

Next is to find out the core principles. Core principles are stuff that does not change with context. You can earn more by doing more like taking up more projects (if you are a freelancer) or earning more by compounding (say your investments that compound over time) or a combination of both.

The idea is to find out what works for you, can you spare more time to work on multiple projects or can you save more, invest more and not break compounding.

This phase will be a trial phase where you experiment with different options to check if working on multiple projects is something that you look forward to or are you getting too stressed with the different timelines and deadlines.

Step 3 is about creating the systems you create to earn more. If you are doing multiple projects, what systems are you using? For example, I will have separate accounts - one for inflow, one for outflows and one for investments.

Step 4 is about creating routines for the system to work. In our previous example, transferring 50% into the investment account as soon as I get any inflow.

Step 5 is all about following your routine without asking any questions. As easy as it sounds, execution is the hardest. Be easy on yourself. The idea is to not blame yourself. Most of us are sloppy and we slack here. If you can crack this piece, you will be set.

The next step is about tracking your metrics and measuring the outputs using the metrics. Asking yourself this question as to "How much % of my income have I saved per month?"

And the last step is to reflect on what is working and what is not. How does it make you feel, would you give it 5 star rating?

While this can work for anything you want to do, whether it is health, career or finances, knowing how to do it helps you get started quickly and easily.

Do try these steps and let me know if you find it useful and what are some of the systems you have created for yourself to earn multiple streams of income.

A friend of mine has worked hard and saved some money and will retire in another 10 years. She wants to invest the corpus and get a return on investment that will help her meet her child's education expenses and also build wealth.

There are three ways of approaching this:

1. Invest the corpus and whatever return on investment she gets, she can withdraw and pay the child's school fees.
2. Invest the corpus and whatever return on investment she gets, she can reinvest so that it helps her build wealth.
3. Invest part of the corpus and get returns and the remaining is reinvested.

The idea here is if you want to invest and periodically withdraw the return, you are breaking compounding.

The power of compounding works when you have invested your principal or corpus and reinvested the interest or return on that investment for a long time.

Here the time is the main consideration. If you have enough time in hand, you will be able to see your money grow at a compounded rate but if you break compounding and withdraw money, it will not grow as much.

Here are two examples that shows what happens when you break compounding.

Scenario - There is an example that shows why you should start investing early and how this will benefit people begin even if you do not have enough to invest.

Who do you think has excess money at the end of 50 years?

We can clearly see that though A has invested a lot lesser, she has a lot more corpus at the end of 50 years.

Even though C has invested a lot more than A, as she started late (approx. 10 years after A did), the corpus in the end is a lot lesser than A

The Key takeaway is to start investing early and if you have not done that, don't worry.

If you start now and let the money compound, your kids can avail this benefit as they will have time to wait for the money to compound.

And the other main takeaway is to not break compounding.

NPS as the name suggests is a scheme launched by the Government of India that accepts contribution and provides pension after the investor retires.

It comes under the purview of pension fund regulator, PFRDA (Pension Fund Regulator and Development Authority).

Who can open NPS account?

It is one of the flagship schemes under which the most of the Indian population aged (18-65 years) will be covered including Central Government employees, private sector employees and even self-employed and freelancers.

Even NRI (Non-Resident Indian) can open an NPS account if he/she has a valid correspondence address bank account in India.

How many can you open?

Each individual can only open one NPS account.

How much return do you get?

It is a market linked product and you can decide how to allocate the funds you invest between Equities (E), Corporate Bonds (C), Government Securities (G) and Alternative Investments (A)

When do I start investing?

Here are examples that will tell you why you should start investing as soon as possible.

If you are in your 40s and you start investing in NPS now, the expected monthly pension is only ₹26,186

Everything remaining the same, if you had invested when you were 34 years old, the monthly pension will be ₹1,29,067

Even better if you start in your 20s, you will get a monthly pension of ₹345,171

Source: NPS trust calculator (let's hope this calc is working fine - Disclaimer: The above calculation and illustration of figures are indicative only and not on actual basis.)

The idea is to know what you can expect and when you should start investing to get a decent amount as pension.

A ₹20,000 pension might not be sufficient given that the lifestyle and needs are only rising. Starting early is an option if you want to increase your pension.

There is more to it than just pension amount and we will explore the other concepts like benefits, taxation and different choices you can make as an NPS investor.

Do let me know if you want to explore specific aspects of NPS by writing to me at sreelakshmi@berupeewise.com.

P.S If you want to know how much to save for your retirement, do check out the financial goals calculator at https://berupeewise-calculators.carrd.co/

Smallcase investing is where instead of buying one stock or a few stocks, you can buy a portfolio or a basket of stocks or Exchange Traded Funds (ETF).

It is like going to a thali restaurant and placing an order for a thali. The chef at the thali restaurant prepares the best dishes and arranges in on a platter that is served to you.

You can also place an ala carte order in the same restaurant if you know what sells best at the restaurant and what you like.

If you are good at stock selection, you may create these smallcases yourself. Or you could subscribe to smallcases for a fee that are carefully curated by portfolio managers and investment advisors based on a certain theme or strategy.

You can place an order to buy/sell a portfolio with one-click. The stocks you bought will appear in your investment account immediately. And, you get to monitor the performance on a real-time basis with the option to exit at any time if you don't want to continue.

A lot of the influencers and youtubers are talking about how they invest in smallcases and their persuasion and strategy is paying off wherein many novice retail investors are curious about smallcase and want to also make these 2-3x returns by investing here.

If smallcases have enticed you and you have decided to take the plunge, here are a few things you might want to consider before you start investing:

• Subscription fees

If you are paying subscription fees of ₹12,000 and invest only ₹50,000 that is the minimum amount of investment in a smallcase, it would not work.

Why?

If you are paying so much upfront, you better invest much more as if you compare this with the expense ratio in mutual funds, it will be much higher.

Increasing your investment is one way of making sure you get back much more than what you pay.

In case of mutual fund, the expense ratio is only about 1 or 2%, you must at least invest ₹6,00,000 in a smallcase to be able to match the cost of mutual fund.

The adverts and YouTube videos don't tell you this. The minimum amount of investment in a smallcase will be less but it won't make sense unless you invest a lot more.

How much are you willing to invest in a smallcase portfolio?

One thumb rule to follow while investing for the first time is invest only if you have money to throw away i.e. you are ok to lose it. If you can't do that, its best to avoid stock investing.

Knowing what risk you can take up is the first step in stock investing.

• Transaction costs and taxes

The smallcase portfolio manager will ask you to rebalance your portfolio periodically which means you will have to click and confirm if you want to buy or sell stocks and the transaction will be executed by your broker.

The smallcase portfolio manager will ask you to rebalance your portfolio periodically which means you will have to click and confirm if you want to buy or sell stocks and the transaction will be executed by your broker.

The broker will charge you per transaction and you also will bear taxes on buying and selling as you will be doing this often.

In terms of taxes, Short Term Capital Gain (STCG) is charged at 15% if you hold stocks for less than 12 months.

The transaction costs are different for different brokers (Zerodha and IIFL will charge you different amounts).

You might want to find out how much your broker is charging per transaction before you buy a smallcase.

• Your return expectation

The CAGR for most of the smallcases in the last 12 months has been very high and if you are expecting to get so much return on your portfolio, it may not happen.

If you had invested a year back, you might be getting these double digit returns but if you start investing now, I'm not so sure you will be able to get so much.

If you understand and expect reasonable returns for your holding period and are willing to accept the risk associated with it, only then should you consider smallcase investments.

• What to do if things don't go as planned

Adani trouble, I bought a few shares and now I'm not able to sell it as there are no buyers.

If you are at a similar position, you must know that once you buy a stock and if your portfolio rebalancing requires you to sell it, the smallcase will throw up an error if there are no buyers willing to buy what you want to sell.

The circuit breakers are in place and you will not be able to reset the error in your account till things get back to normal.

• Is real time information really good for you

Seeing your portfolio perform bad might force you to stop the smallcase midway. If you can't bear the loss, it is best to avoid smallcase.

That's a total rant from my own experience of experimenting with a smallcase. That said, I would say that if you are not a novice at stock investing and are able to understand smallcase and would still like to try it, keep these things in mind before you venture into it.

It is not for everyone but if you do have a long term time frame and are ready to experiment and can take the volatility associated with a smallcase, go ahead and buy it.

P.S - I am not an investment advisor and I'm writing from my own experience of trying to invest in a smallcase just to understand how it works.

Let me know about your experience of investing in a smallcase by writing to me at sreelakshmi@berupeewise.com