It’s already 7 April. The first week flew past mainly due to Good Friday and Easter; fasting and feasting🥂.
March was year end and that pressure from work is over. And before we start making vacation plans, it is a good time to take stock of our individual balance sheet; to see whether we have made progress or suffered set-backs in our financial goals. It is not a pleasant task, many a times the liabilities exceed our assets and we want to wish things away. But never happens !
It was Robert Kiyosaki in his book Rich Dad, Poor Dad who defined an asset as something that puts money in your pocket and a liability as something that takes money out of your pocket. It’s a neat way of sizing up our possessions.
So in FY 22 what can we do to grow our assets and reduce our liabilities as common sense dictates? Take two small steps.
Reduce EMI keeping the loan term the same. There is a sliver of a silver lining; we are currently in a regime of low interest rates. So we can take up the conversion option provided by the lenders and reduce the interest rate on our loans and thus lower our EMIs, keeping the loan term the same. Thus our monthly EMI outflow will decrease.
Increase the SIP in mutual funds. And while we are paying lower EMI, the money saved can be channeled to increase our SIP in mutual funds by 20% atleast. Most of us keep the same SIP for many years together simply to avoid the hassle of renewing the SIP. This convenience comes at the cost of missing out on the benefit of compounding. Most MF houses are happy with the unchanged SIP amounts, but it is in our best interest to increase the amount annually by 20% atleast to keep our funds on track to meet the lump sum goals.
If you are paying Rs.1000/-pm in SIP, increase to 1200/- pm, a small step but highly beneficial.
“Without your involvement you can’t succeed. With your involvement you can’t fail.” – APJ Abdul Kalam
Till next post, take care !!