How has the last year changed your perception on money and personal finance? Does anything stand out as a generalizing change in your money habits? While your financial planning and money habits are largely a reflection of your goals and desires in life, there is a larger finance philosophy that drives the big picture of your financial life. If you are wondering as to what we are talking about, then let’s simplify it further.
Your finance philosophy can be defined as an aggregate of generalizations that define your perspective on money, the everyday habits that reflect your perspective on money, and how you work towards the big financial goals of your life - like thinking about your retirement lifestyle, the kind of life you will lead after attaining a level maturity in your career, how you will spend along the way, and what you do to save your money. 2020 brought many changes in our money mindset. Going forward, here are some new finance philosophies to adopt in 2021, and start your financial life on a new journey.
Debt is an emergency
Take a new approach to loans and debt. In general, those with good spending habits look at loans that don’t result in appreciating assets as a liability. This leaves loans as instruments to help you in emergencies rather than to enable your spendings.
Take a similar approach to tackling your current debt - treat your repayments as an emergency after you have recovered from the situation that led you to taking a loan in the first place. Get your finances to ground-zero first by treating debt as an emergency going forward.
Yes to free cash
Never say no to free cash. The past year got people thinking about every rupee of money they spend - work from home allowed for more introspection on personal finances. Schemes that help you save money on your spendings are essentially free cash.
If a payment method helps you save money through cashbacks and rewards on your spending habits, then don’t resist change. However, pay attention to how much effort and investment these schemes ask from you. Know how to spot situations that look beneficial on the outside, but make you spend more after signing you up.
A perspective on healthy savings
Saving money is the cornerstone of financial stability and prosperity in the long run. However, there is a line beyond which savings are no longer healthy for you. Consider a person who trades to earn money on the side. For this person, saving money by doing their own laundry makes sense only if they would earn less money trading for the same amount of time.
For such a person, saving by doing their own laundry is becoming a barrier in raising their bar of financial success. Know the difference between saving habits that add positively to your financials and those that impede your financial and general well-being. Conversely, don’t leave your savings abandoned in a savings account. Healthy savings also entail a purpose-driven approach to managing your savings. Don’t make investments that exceed your risk tolerance, and practice a calculated approach to growing your savings, in line with your life goals.
A philosophy of financial automation
Technology was a major winner in the 2020 markets. People are also taking a tech-first approach to their finances - looking forward, automation is the new approach to personal finance. Automate your finances to the fullest. Do you miss loan repayment and SIP dates? Do you run out of critical subscriptions or pay your toll taxes with cash?
Banking, trading, insurance and finance companies are providing a number of automation features with their services today. Use them to the fullest and bring a hands-free approach to your finances too. If you're feeling adventurous, you can even automate your trading strategies with algorithmic trading, which can help you eliminate bias, repetitive tasks and manual error from your trading practice.
Is less actually more?
Less is more is a common saying that you will come across while reading on spending habits. This past year, many had the opportunity to spend more time closer to the things they spent money on in the past. This past year was a great opportunity to reflect on spendings that you have come to value in the long run. If your spending habits are standing in your way to achieving long-term goals that actually matter to you, then take a step back, and reflect on your spending habits that actually make you happy beyond immediate pleasure.
Going forward, adopt the philosophy of less is more, and explore a zen approach to bringing financial prosperity without compromising on your sense of fulfilment. Give your finances a new start by spending consciously on what you actually value in the long run - because the first step towards a secure and fulfilling future begins with that one change in mindset.
This new year, give your financial life a new start, with Angel Broking - open a free demat account, and start giving your financial resolutions a new shape, by leveraging the power of growth with equity markets.
And don’t forget to check out Angel Broking’s top picks in the stock market for this new year - our gift to you for starting the year with a #smartsauda, that will lay the foundation of long-term prosperity, and help you get your finances geared up for the coming year. Here is us wishing you a happy new year!
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