This image has been doing the rounds in the Fintwit community for some time now.
Being an equity investor for more than a decade now, I was elated as soon as I saw this.
However, today morning while I was dropping my 8-year-old kid to his school bus stop, I saw a couple of beggars. Something dawned on me then and hence this post.
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The problem with the above piece of statistics is that it doesn’t tell you anything about the majority of people in India grappling with their financial struggles in their own unique ways.
Of course, SIP is increasing and the participation of Indians in the equity market is also moving in just one direction. Up.
Last month, for the first time in India, the number of Demat accounts crossed the 10 crore mark. That definitely is a cause for celebration for equity investors. But let’s put things in perspective. Out of 140 crore population, if 10 crore is in equity, you still have a long way to catch some of the developed western countries. On a percentage basis, we still have about 7% of the population in equity markets compared to north of 30% for the majority of developed countries in the world. And it may take a long time to reach there. That’s ok. The pace is increasing and we may get there sooner than we thought 5 years ago.
But my point is that it again hides the broader problem. That as a group we are not earning enough. Just take a look at the table below:
Let’s for a moment assume that the 2022 numbers are fairly accurate. On average, we are earning only 1.5 lac rupees a year. That translates to roughly thirteen thousand rupees a month.
Now forget about equity investing, what kind of financial planning can you do for a majority of us?
Unfortunately, none.
Tim Maurer, a personal finance expert makes a very compelling and eloquent argument: “Personal finance is more personal than finance.” Ben Carlson wrote a wonderful blog with the same title.
I am just borrowing the same thought process in financial planning.
Financial planning is more about finance than planning. Period.
If you are earning 13000 a month, no amount of planning can help you get out of your misery.
You need to first rise up the ladder of finance.
I will do a massive disservice to you if I now sell you term insurance, or health insurance, or talk about keeping funds aside for emergencies.
Like most things in life, 99% of financial planning or being financially independent is doing some basic 2-3 things really well.
And what are they?
I will share what I wrote in an earlier post.
First, invest time and money in skill development in the early part of your career to earn well. You may build a business or you may work for someone. Don’t get into the ego battle of which one is better.
Trust me, both work well. Check what works well for you.
Second, save aggressively and invest systematically. Initially, in a few broad index funds or Mutual Funds. And gradually as your investible amount increases over time, shift to systematically investing directly into stocks if you can develop the confidence in understanding individual businesses.
Third, Don’t interrupt compounding. Stay the course through the ups and downs.
But my first duty is to realize that a majority have not yet begun the first step well. So my job starts right there.
Of course, as you rise up the ladder of finance in your life, I will help you plan your finances better.
But I cannot cheat you into believing that financial planning begins with planning.
No. That’s a lie people tell you to sell their services.
Financial planning starts with finance. Planning comes at a much later stage.
So you better work on your finances now.
Late Mr. Parag Parikh said this: “My job is to create HNIs and not chase them”.
We at ZenNivesh, the financial planning arm of Smart Sync Services, have a similar mission.
“Our job is to create financially independent Indians and not chase them.”
And we are not going to do that by overdosing on planning and complexity.
We are old school.
We will focus more on what matters.
Because we don’t want you to miss the forest for the trees.
And remember,
Financial Planning is more about finance than planning.
If you like our philosophy and wish to know more, do write to us.