Insights

The easy way to pick-up a good financial habit

August 18, 2017 . Akash Kapur

Money bag with coins falling in it, with its growth being marked on a scale

It takes anywhere from 18 to 254 days to make or break a new habit, experts say. That means you need to spend at least 18 days (and probably much, much more) repeating the same actions if you are to change your habits.

If you’re like me and have tried (and failed) to pick up new habits or change your existing habits for the better, you’ll know how hard this is. Even for simpler stuff like going to bed early, and more interesting stuff like learning how to play the guitar.

The question now arises: If it’s so difficult to change even the simpler habits like these, how do you go about changing more difficult and important ones – like your financial habits?

That’s where Systematic Investment Plans or SIPs, come in. A simple yet powerful investment tool, SIPs make it easy to start and maintain the healthy habit of saving and investing. The best part? With a SIP, all you need to inculcate this habit is one day a month.

What is a SIP?

A SIP is a method of investing that allows you to automatically invest a fixed amount at regular intervals (usually monthly). It does this by making use of a bank mandate – this mandate (also called an ECS or NACH mandate) allows your mutual fund distributor/platform to directly debit your account on the pre-fixed date, for your SIP investments.

All you need to do is setup and select a mandate, choose the funds you’d like to invest in, and pick the date of your investments. And that’s it! Your SIP will be up and running.

How SIPs help you ‘learn’ good financial habits

The most important advantage of a SIP is that it is automated. Once your SIP is set up, your account will be debited and investments will be made automatically every month. There’s little to no chance of your forgetting to make an investment. (If you’d rather not automate it, you can opt to make the payment yourself every month too.)

This helps inculcate the following:

  • Investing discipline: With your account being debited every month, you soon get used to the new pattern of monthly investing and plan your budgets accordingly. If you keep your SIP going, you’ll easily pass the habit-forming mark and make investing a regular habit.

  • Long-term perspective: When you invest regularly, you do not need to worry about short-term market fluctuations – they all even out over the long-term. This removes the risk and pressure of ‘timing the market.’ What’s more, with a SIP, these fluctuations can work in your favour by lowering your average investment cost (you end up purchasing more MF units when the markets are low). In other words, when you go the SIP way, any time is a good time to invest!

Another advantage of SIPs is that unlike lump sum investments, SIPs can be started for as little as Rs 1,000 a month. So, you do not need to save up a huge amount to start investing. If you can’t invest too much, even saving just Rs. 35 a day will be enough to kickstart your monthly investments and build wealth!

So, what are you waiting for? It’s time to pick up a good financial habit. It’s time to start investing!


 

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