Does Having a Financial Accountability Partner Help – The Transcript
Vinu: Hi everyone, this is Vinu here and today we have an interesting concept that we’d like to talk about when it comes to our wealth creation journey.
Many people see money management as a very personal exercise. But actually, when you think about it, there are so many aspects involved and most of the time it is quite challenging to manage it on our own.
So, I have Anita here with me who is in his mid-twenties now and has been working for about 3 years now. How would you say your financial journey has gone so far?
Anita: It was an exciting period when I started working. From receiving pocket money to receiving salary on a monthly basis. It was all rosy until I realized that keeping the money in my savings bank account is not going to grow the money. Now, two years down the line I am clear on what I have to do with my salary on a month to month basis.
Vinu: It’s interesting that you say that. What do you think changed in the last 2 years?
Anita: Having a background in science, I am clearly not finance-savvy. I needed help on how to manage my monthly income. So, I approached my friends from work who suggested that I invest some money in mutual funds. As I started digging deeper, I realized that there are too many classifications within mutual funds. Ultimately, I settled for a SIP into equity mutual funds as it was structured to give more returns over the long run.
Eventually, I realized that I needed some solid professional guidance and began working with a financial planner.
Vinu: What made you realize that? And how is that going for you?
Anita: Funny story, actually. I am an overthinker and at that point, there were a couple of things bothering me. The first was, What would I do in case of a Financial Emergency. I didnt know how I would fund it if overnight I had to pay a big amount. The other thing at that point is that I just bought a car. I was servicing a loan, and I wanted to know if I should be putting more money in to close that loan faster. That is when I decided to approach a financial planner to see what they could help me with.
The first thing they encouraged me to do is to build a contingency reserve for my emergency requirements. It gave me a sense of peace mentally because I wasn’t worried too much anymore. They also told me that I need to get life insurance and health insurance in place over and above what my employer was offering at that point. They then sorted out how much needed to go towards the car loan, and helped me prioritize my other goals and decide how much I need to invest towards them.
I’m glad I decided to take help from a professional to sort my finances and put them in place. I don’t think I would’ve done such a great job on my own.
Vinu: That is great, Anita! So, how has that changed the way you manage your money?
Anita: It has mainly helped me in three aspects. The first is that I started feeling more accountable to my plan. My financial planner would continuously work with me and motivate me to save towards my goals. That helped. I also think planning has helped me become more disciplined in the way I save and invest.
I’ve continued my SIPs from the time I started, and in fact, I have scaled them up as well with every salary raise. From time to time, whenever I got a bonus, I made sure that some part of it goes into savings as well. The third part would be that I avoided some common mistakes like breaking my long-term investments for emergencies or making impulsive purchases. I think this has reduced because now I am a lot more conscious of my surplus savings – and I’m always thinking about whether I should save it or spend it. This has helped me reduce the number of impulsive purchases that I’ve made.
Vinu: So, from what you’re saying I understand that over the last 2 years, you’ve changed your approach to money management. Primarily it is in terms of having a financial accountability partner. Whether it was your friends early on, or your financial planner, later on, they were able to help you in staying the course and guiding you to achieve what you truly want. And that seems to have given you a lot more clarity and comfort with the way you manage your money and your wealth creation journey.
And for all of you listening to this podcast, I think you should look out for your own financial accountability partners. This should be someone who you can trust, someone who cares for your well-being, and most importantly someone who knows about how personal finance works. This will ensure that you meet your financial goals as planned.
You could also take the ithoughtwealth 2020 survey or sign up for the ithoughtwealth 12 step program to get your finances in order. Thank you for listening in!