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

Published: May 4, 2019 at 9:49 am

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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.

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.

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About the Author Pattabiraman editor freefincalM. 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 Twitter or 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, Cognizant, Madras Atomic Power Station, Honeywell, Tamil Nadu Investors Association. For speaking engagements write to pattu [at] freefincal [dot] com
About freefincal & its 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. Follow us on Google News 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)
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