Last Updated on June 28, 2020
Every year, tens of thousands of people start their careers and recognise the need to manage money. Yet another tens of thousands want to correct past mistakes and get their investments in order. A group just as strong is getting ready for retirement. All of them are rookies or newbies. Here is one rookie mistake that everyone should avoid while starting or restarting money management.
The number one rookie mistake is not buying too many mutual funds or investing without a plan or buying products for tax saving without proper understanding. Those are outcomes. The root cause for all these is impatience.
Impatience is the number one rookie mistake. A sense of urgency, a feeling that doing nothing is wrong is typically the cause behind poor investment choices. It is this urgency to choose that makes us focus on products and not needs.
Look at how those getting ready to retire approach money management. The only question they ask is a generic, useless one like, “what are the investment options for a retired person?”. The impatience to “act” makes us want to get to the product stage as soon as possible without even the semblance of a plan. We shall say no more about older rookies other than that it is best they get unbiased commission-free advice from SEBI registered fee-only financial planners.
At least young earners who have realised the need to get rich or spend well forever have time on their side. They should not start investing until they can convince themselves with answers to:
- Why am I investing?
- Do I even need to save tax? Valid question with the new tax regime. At least for young earners, the obsession on section 80C can be eradicated. For older investors: New Tax Regime vs Old Tax Regime Calculator: Check which is better
- Where should I invest so that I can achieve my goal or at least stand a reasonable chance of doing so?
- How should I invest?
If these questions appear vague, then here is a specific checklist. Print this and check off each time: Download A Personal Finance Self-Evaluation Checklist
They can take up to a year to answer these and find solutions that would work for them. Seeking the best solution would be a year wasted. I can show you members of a certain forum who have wasted years trying to find the best solutions. Do not aspire for alchemy.
Even those who want to stick to the old tax-regime and lock up money in exchange for saving tax can/should take this “time off” and seek answers. In the meantime, they can dump some money in EPF (via VPF) or NPS or start a PPF. The tax saving plan can be redrawn once the above questions are answered right.
The new tax regime is a blessing for the young earner about to start earning. Opting for this would eliminate truckloads of useless choices and lead to truly minimalist investing. Will people choose it is another matter: Netizens say no to the new tax regime: prefer deductions
In case you are wondering, what about term insurance, health insurance, emergency fund etc., yes those come first. You can take six months to get those and another 12 months searching for clarity about what your goal is, and how you should achieve it, what are the risks etc. This ebook would help you get started step-by-step: Download Re-assemble e-book on our 6th birthday
People who say, “I have just started my career, I do not have any goals., I just want to invest” suffer from acute impatience disorder and have clearly not looked hard enough. Hint: financial independence is a mandatory goal
“I have already made some mistakes due to impatience. How do I correct them?” Start here: A Step-By-Step Guide to Long Term Goal-Based Investing and here: Investing in mutual funds for beginners: Basic MF questions answered
Also read: Have you started multiple SIPs for small amounts? Correct this mistake now!
Trust the process. Your time is coming. Just do the work and the results will handle themselves. – Tony Gaskins
Use our Robo-advisory Excel Tool for a start-to-finish financial plan! ⇐ More than 1000 investors and advisors use this!
- Follow us on Google News.
- Do you have a comment about the above article? Reach out to us on Twitter: @freefincal or @pattufreefincal
- Join our YouTube Community and explore more than 1000 videos!
- Have a question? Subscribe to our newsletter with this form.
- Hit 'reply' to any email from us! We do not offer personalized investment advice. We can write a detailed article without mentioning your name if you have a generic question.
Explore the site! Search among our 2000+ articles for information and insight!
About The Author
Dr M. Pattabiraman(PhD) is the founder, managing editor and primary author of freefincal. He is an associate professor at the Indian Institute of Technology, Madras. He has over nine years of experience publishing news analysis, research and financial product development. Connect with him via Twitter or Linkedin or YouTube. Pattabiraman has co-authored three print books: (1) You can be rich too with goal-based investing (CNBC TV18) for DIY investors. (2) Gamechanger for young earners. (3) Chinchu Gets a Superpower! for kids. He has also written seven other free e-books on various money management topics. He is a patron and co-founder of “Fee-only India,” an organisation for promoting unbiased, commission-free investment advice.Our flagship course! Learn to manage your portfolio like a pro to achieve your goals regardless of market conditions! ⇐ More than 3000 investors and advisors are part of our exclusive community! Get clarity on how to plan for your goals and achieve the necessary corpus no matter what the market condition is!! Watch the first lecture for free! One-time payment! No recurring fees! Life-long access to videos! Reduce fear, uncertainty and doubt while investing! Learn how to plan for your goals before and after retirement with confidence.
Our new course! Increase your income by getting people to pay for your skills! ⇐ More than 700 salaried employees, entrepreneurs and financial advisors are part of our exclusive community! Learn how to get people to pay for your skills! Whether you are a professional or small business owner who wants more clients via online visibility or a salaried person wanting a side income or passive income, we will show you how to achieve this by showcasing your skills and building a community that trusts you and pays you! (watch 1st lecture for free). One-time payment! No recurring fees! Life-long access to videos!
Our new book for kids: “Chinchu gets a superpower!” is now available!
Must-read book even for adults! This is something that every parent should teach their kids right from their young age. The importance of money management and decision making based on their wants and needs. Very nicely written in simple terms. - Arun.Buy the book: Chinchu gets a superpower for your child!
How to profit from content writing: Our new ebook for those interested in getting side income via content writing. It is available at a 50% discount for Rs. 500 only!
Want to check if the market is overvalued or undervalued? Use our market valuation tool (it will work with any index!), or you buy the new Tactical Buy/Sell timing tool!
We publish monthly mutual fund screeners and momentum, low volatility stock screeners.
About freefincal & its content policy Freefincal is a News Media Organization dedicated to providing original analysis, reports, reviews and insights on mutual funds, stocks, investing, retirement and personal finance developments. We do so without conflict of interest and bias. Follow us on Google News. Freefincal serves more than three million readers a year (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 paid articles, promotions, 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
- Twitter @freefincal
- Subscribe to our Youtube Videos
- Posts feed via Feedburner.
Our publications
You Can Be Rich Too with Goal-Based Investing
Published by CNBC TV18, this book is meant to help you ask the right questions and seek the correct answers, and since it comes with nine online calculators, you can also create custom solutions for your lifestyle! Get it now.Gamechanger: Forget Startups, Join Corporate & Still Live the Rich Life You Want
This book is meant for young earners to get their basics right from day one! It will also help you travel to exotic places at a low cost! Get it or gift it to a young earner.Your Ultimate Guide to Travel
This is an in-depth dive analysis into vacation planning, finding cheap flights, budget accommodation, what to do when travelling, and how travelling slowly is better financially and psychologically with links to the web pages and hand-holding at every step. Get the pdf for Rs 199 (instant download)