Starting late? Here is how you can get your finances on track!

If you were born between 1970 and 1980, almost everything you read about personal finance must depress you and scare you. You are filled with despair as it seems like you are already too late! Well, here is news for you: the adage is right, Better late than never.

It may be late for retiring early (Are you kidding? Here I wish I had more working life left) and that beach condo, but it’s not too late to retire with dignity. With discipline, perseverance and positivity, even now you can achieve relative financial independence for your sunset years. But before we go further, there are two fundamental principles you need to know.

Belief before behaviour

Our primary enemy has been our clueless mindset. So first off, make up your mind not to be casual or gullible anymore. It would help if you had wisdom, courage and conviction and vast amounts of it. So, no more doing what your dad did and what your uncle said; No more investing based on tips or buying products some thirty-something has bought. It would be best if you took total ownership of your finances. Get ready to read, ask questions, acquire new ways of thinking and dare to take calculated risks. 

Procrastination is lethal

You have little time, so every moment and every rupee counts. So as soon as you finish reading this article, you need to draw up a list of actions and a timetable and follow it. So are you ready? Here we go!

Choose your path

Your investment journey begins by picking one of two roads. 1) One is to be a DIY investor: This involves reading, researching, making decisions on your own about where and when to invest, and when to exit. You could do this if you understand finance, business and you have the time and the inclination.

2) the second choice is to pick a Fee-Only Financial Advisor. This involves picking a good advisor, working with him, using his expertise to invest and exit, and all the while reading and building your knowledge. You will pay anything between 5k to 20k for an advisor’s services.

Please do not read further until you make this decision if you have picked the Fee-Only advisor route, head here. If you plan to do the DIY route, take a deep breath and read on.

DIY Investing for late starters – IBIS*

Insure: If you are not yet covered, buy suitable Term life insurance (if you are under 60) and Health insurance immediately. Pick a good term life insurance that is affordable from a reputable provider. Don’t worry about a hundred more or less in cost or a few percentage points more or less in claim settlement. Pick a name you know among the top 5, if it is affordable, contact them right away and get this out of the way. Same for health insurance: Pick a good affordable provider and insure your family with a policy.

Budget: Are you in the habit of budgeting? Can you tick off on your fingertips the total cost of running your household? If you aren’t doing it already, use a mobile app or an excel sheet or just the good old register to make a budget. Write down all your expenses, be as comprehensive as possible. 

Save: Next, look at that budget again. Figure out if you can reduce any unnecessary expenses and make an ideal budget. This time, be realistic and cautious. But make sure to allow some money for lifestyle expenses (dining and travelling, entertainment). Also, make a small provision for unexpected expenses. Now you have the magic number that is going towards your investment.

Invest: This is, believe it or not, the easiest part. Divide the whole amount into two equal parts. You will need to invest one part in debt products, and divide the other half between equity mutual funds and 2 or 3 excellent stocks. Are you wondering, “How do I identify the debt instrument, the mutual funds and stocks to invest in?”. This is where the DIY part comes in. This is the point at which you get ready to learn, decide and read, decide and buy, decide and track, decide and sell, and decide and buy and….on and on it goes. 

If you realised that is a whole lot of deciding, well, yes. There is a whole lot of deciding to be done in DIY investing. And every decision has consequences. Inaction and indecision also have consequences. Often people think the challenge in DIY investing is understanding finance and financial concepts and instruments. Actually, while that is not easy, it is doable. The real challenge in DIY investing is sound decision making. DIY investors fail to meet goals often because they are not good decision-makers. Either, they make uninformed, quick, knee-jerk decisions or they do not make decisions at all. For a late investor, this can be harmful. So if you feel you are not good at decision making, consider the Fee-Only route again. It will save you heaps of time and effort, which will have a huge impact on your corpus. 

Finally… whatever you do, do not postpone this any further. Be wise, moneywise!