Is your money sleeping in fixed deposits because you are undecided?

Published: May 4, 2019 at 9:49 am

Last Updated on

The reason I speak before employees is not to teach them money management (no such lofty ideas please) but to learn common practices from them.  Real people behave very differently from an Excel sheet! During the course of my talk, I say something like, “we do not know what to do our salary minus expenses, so we just open FD after FD”.

The idea is to look at how the audience reacts. Many of them let slip a guilty smile which says it all. As long as you do not have a plan, an FD is a perfect place for your money to rest. So you may have to pay a little more tax, but at least you sleep in peace. The problem, however, is, that one cannot keep doing this and it is so easy for the months to become years.

If you have not already done so, watch my corporate presentation here: Commonsense approach to managing money You could then download Re-assemble e-book and implement the steps. However, for many, that marks the start of a new challenge.

Is your money sleeping in fixed deposits because you are undecided?

Money management is all about making decisions, fast. As often, the first one is the most important: Should I outsource my money management to a fee-only financial advisor (no one else!) or should I DIY? Trouble is, 8 out 10 people would choose DIY without understanding what it actually means.

They would then go on forums, list their portfolio and ask for opinions. Graduation from inaction to indecision! If you think this description fits someone you know, my sincere request would be to consider hiring a SEBI registered fee-only advisor from this list (I do not get any money from this!). Work with them (100s of freefincal readers do), find out where you are, where you need to be and start your journey one step at a time. If you later wish to DIY, it is fine, but at least you quickly completed the most important steps.

I notice that many women part of a double income household are guilty of letting unutilized salary pile up in fixed deposits. Talk to your spouse and resolve to work towards your financial goals.

Hate ads but would like to support the site? Subscribe to our ad-free newsletter and get beautifully formatted full articles delivered to your inbox!

The DIY solution to money sleeping in FDs

If you do not wish to work with a fee-only financial planner, you can easily DIY this problem.

  1. List your goals.
  2. Jot down clearly the dates when you need money (do not just write the year, time to be specific!)
  3. For all goals that occur within 15 years, stick to the FDs (too late for equity here)
  4. You can consider some exposure to equity mutual funds only for goals more than 15 years away.
  5. Start slowly. Make a small investment in an equity fund. Say 10% of what you park in FD or RD each month. observe the volatility and then gradually increase exposure
  6. The Kindle edition of my book You can be Rich Too With Goal-Based Investing is now available for only Rs. 149. That is a reasonable starting point.
  7. Use the free calculators associated with the book to get an idea about where to invest.
  8. You can also use the freefincal robo advisory template to create a thorough financial plan

If you are used to fixed deposits all your life, do not make drastic changes. Start slow change small.

Yes, I have said these things again and again and again over the years, because each time I have done so, it meets with new sets of eyeballs. Hopefully, this would too.

Catch up on the latest videos

Do share if you found this useful
Hate ads but would like to support the site? Subscribe to our ad-free newsletter and get beautifully formatted full articles delivered to your inbox!

About the Author

M Pattabiraman author of freefincal.comM. Pattabiraman(PhD) is the founder, managing editor and primary author of freefincal. He is an associate professor at the Indian Institute of Technology, Madras. since Aug 2006. Connect with him via Linkedin
Pattabiraman has co-authored two print-books, You can be rich too with goal-based investing (CNBC TV18) and Gamechanger and seven other free e-books on various topics of money management.  He is a patron and co-founder of “Fee-only India” an organisation to promote unbiased, commission-free investment advice.
He conducts free money management sessions for corporates and associations on the basis of money management. Previous engagements include World Bank, RBI, BHEL, Asian Paints, TamilNadu Investors Association etc. For speaking engagements write to pattu [at] freefincal [dot] com

About freefincal & Content Policy

Freefincal is a News Media Organization dedicated to providing original analysis, reports, reviews and insights on developments in mutual funds, stocks, investing, retirement and personal finance. We do so without conflict of interest and bias. We operate in a non-profit manner. All revenue is used only for expenses and for the future growth of the site.
Freefincal serves more than one million readers a year (2.5 million page views) with articles based only on factual information and detailed analysis by its authors. All statements made will be verified from credible and knowledgeable sources before publication. Freefincal does not publish any kind of paid articles, promotions or PR, satire or opinions without data. All opinions presented will only be inferences backed by verifiable, reproducible evidence/data. Contact information: letters {at} freefincal {dot} com (sponsored posts or paid collaborations will not be entertained)

Connect with us on social media

Our Publications


You Can Be Rich Too with Goal-Based Investing

You can be rich too with goal based investingMy first book is meant to help you ask the right questions, seek the right answers and since it comes with nine online calculators, you can also create custom solutions for your lifestyle! Get it now.  It is also available in Kindle format.
Gamechanger: Forget Startups, Join Corporate & Still Live the Rich Life You WantGamechanger: Forget Start-ups, Join Corporate and Still Live the Rich Life you wantMy second book is meant for young earners to get their basics right from day one! It will also help you travel to exotic places at low cost! Get it or gift it to a young earner

The ultimate guide to travel by Pranav Surya

Travel-Training-Kit-Cover This is a deep dive analysis into vacation planning, finding cheap flights, budget accommodation, what to do when travelling, how travelling slowly is better financially and psychologically with links to the web pages and hand-holding at every step.  Get the pdf for ₹199 (instant download)  

Free Apps for your Android Phone

All calculators from our book, “You can be Rich Too” are now available on Google Play!
Install Financial Freedom App! (Google Play Store)
Install Freefincal Retirement Planner App! (Google Play Store)
Find out if you have enough to say "FU" to your employer (Google Play Store)

Comment Policy

Your thoughts are the driving force behind our work. We welcome criticism and differing opinions.Please do not include hyperlinks or email ids in the comment body. Such comments will be moderated and I reserve the right to delete the entire comment or remove the links before approving them.

5 Comments

  1. It’s surprising to see the comment about opting for equity only for goals more than 15 yrs.
    It’s too defensive and if someone is having that kind of an approach, then most ppl can’t get into equity at all.
    What is the guarantee that after 14 yrs, there is no major crisis in economy which could make all your equity allocation go for a toss.

    It’s difficult if we go so defensive in our approach.
    Equity for goals of 5+ yrs should be good if one opts for largecap/hybrid funds with the current status of our economy. With a good fin advisor, this can be even bettered.

    Moreover with FDs fetching around 5pc returns post tax, what is the point in opting for them anyway for any major goals. With inflation, it just evens out.

  2. The income flooring excel is really simple and was an eye opener for me. At -2% negative returns over inflation, corpus required jumped to 85x from 51x for early retirement. Excel is real eye opener.

  3. In PMS investment how many years needs to be considered ? Same 15 years or less.
    In PMS fund manager is having entire control on the portfolio.

  4. Another trouble i am having with equity is profit booking. I invested in equity (via PMS)in aug-2016 n had 22% profit till feb-2018 n now its 1%. I didnt thought to perform profit booking as invested for 5yrs n expectation was 15%CAGR in period of 5 year.
    Its very painful at the moment but i believe in long term investment n believe things will term my way n will achieve target.

    Is this the right approach to stick to target n dont perform profit booking in middle.?

    1. It is been portrayed that long term is an answer for equity fluctuations such as yours and those gone through 7 year SIP should reap in above FD & inflation returns.

      Longer bull run in the last one decade followed by Crash in coming years could change the above hypothesis which is currently taken for granted.

      I am not really sure someone who invested lumpsum at PE levels of 29 in Mar’19 would reap in atleast FD returns in next 15 years.

Leave a Reply

Your email address will not be published. Required fields are marked *