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Shalini and Sunil Bakshi defy the popular notion that Indians are traditionally savers and need not be taught how to save. Both are earning well but they are also spending equally well whether it's a bigger car, house or a long vacation. Shopping binges are not only domestic but also international.
For the last couple of years, I have heard them talk about the need to start their financial planning but it takes a backseat for various reasons right from corporate travel to meetings to vacations and so on. This was like Sunil's regular trips to the gym which stalled due to an illness and then never started for the next two years (even though Sunil knows how important this is for his health and family).
Procrastination or inaction is one of the biggest reasons for investors not achieving their financial goals, for lower returns and losses. So why do people really procrastinate?
There are several reasons why people delay or do not take action even when things are in their economic interest. They are caught up in many activities and action takes a backseat; they are not able to decide; they do not have time; or its just inertia, laziness or lack of understanding
Sunil had some 400 shares of Pfizer that I have been telling him to sell when the stock was over Rs 1050 and opt for some other growth oriented blue chip stock. He wanted to do it but somehow he never got around to doing it. Today the stock is at Rs 650 levels. Now, he will surely not miss a meal because of his inaction, but these are some small steps that lead to where you end up in terms of your financial net worth.
At the same time, there are some investors who want to act all the time and believe that they have to keep jumping as the stock market index goes up and down. But for these same investors, when it comes to other areas they have no interest in things like buying a life insurance (pure term plan: risk cover) or making a will; these activities again take a backseat because there are no immediate returns or instant gratification.
What should one do to overcome this?
Read the book First Things First or The Power of Now. If you want a quick read, go for the executive summary of this book that can be read in 20 minutes. This could probably help in terms of introspection on your priorities and things that you might need to focus on.
If you do not want to read the books, then set a real short term goal like opening a bank account and doing it. You could use a penalty clause here and pay your wife Rs 1,000 for every day that you do not finish the activity.
If none of these work, you need to outsource or have a mentor. You need to have someone who is accountable and who you can blame when things go wrong (on a lighter note).
If none of the above work, then continue with what you have been doing and hope for the best.
Finally, it is the doing that makes all the difference. There is no substitute for action. Just knowing that exercise is good will not keep you fit. In the same vein, just knowing that this investment is good is of no use unless you buy it.
I come across so many intelligent people like Sunil who know many things but are simply unable to implement them because of various reasons. Whatever the reason, it affects your economic well being at the end of the day. For example, if you have to buy insurance, do it now.
Sunil had exclaimed to me sometime back: "I knew this mutual fund would do well, I wish I had put in money here. This fund manager was with me in my management school and he had told me to invest in this fund when I had met him. I know that this fund still has a lot of potential considering his capabilities." He is yet to invest in this fund one year after.
At the end, we have to choose between our financial situation driving us all the time, or we driving our financial situation. The first choice is what a lot of people follow as it is very easy and there's nothing to do.
The second choice is something where we have to think , act and then review; a slightly complicated situation for most people. So we end up taking the easier route and hope things will fall in place. Well, hope is surely not a strategy when it comes to your personal finance matters.
The writer is director, My Financial Advisor.
