{"id":15915,"date":"2019-07-22T12:33:29","date_gmt":"2019-07-22T07:03:29","guid":{"rendered":"https:\/\/www.fundsindia.com\/blog\/?p=15915"},"modified":"2019-11-07T12:27:32","modified_gmt":"2019-11-07T06:57:32","slug":"financial-planning-why-important-resist-peer-pressure","status":"publish","type":"post","link":"https:\/\/www.fundsindia.com\/blog\/personal-finance\/financial-planning-why-important-resist-peer-pressure\/15915","title":{"rendered":"Financial planning – Why it’s important to resist peer pressure"},"content":{"rendered":"

Raise your hands if you\u2019ve been to an expensive bar\/restaurant you could not afford, simply because your friends were going. Raise your hands if you went on an unplanned trip because your friends asked, even though you didn\u2019t have enough cash. Raise your hands if you find your bank balance close to zero around the 25th of every month.<\/span><\/p>\n

\"Don't<\/a><\/span><\/p>\n

With the boom in the IT sector in the early 2000s, salaries of middle class grew rapidly. Activities which were earlier looked at as luxuries, became commonplace; going to an expensive restaurant for dinner, late night parties over weekends, weekend trips to nearby hill stations, et al. The pressure to keep up with our social circles also grew at the same time. Modern jobs got concentrated in a few cities and this led to lifestyle changes overnight. And most of us wanted to keep up with the times and be a part of the change.<\/span><\/p>\n

However, the boom in income was followed by a similar boom in the cost of living. When I was in school, my parents paid Rs. 300 as monthly fee. Today you\u2019ll be hard pressed to find a good school for even Rs. 3000 a month. Rents shot up from Rs. 2,000 for a 2 BHK flat to Rs. 20,000 for a 1 BHK flat. Housing prices went up from Rs. 1,500 per sq. ft. to Rs. 15,000 per sq. ft. Today we are spending a lot more just on living a regular life than a person 20 years ago would have needed for a luxurious life.<\/span><\/p>\n

Planning your finances, therefore, is of utmost importance today. You need to plan for your house, your car, and regular upgrades to your expensive electronics. More importantly, you need to plan for your children\u2019s education and your own retirement. Now, some of you might not have children, but pretty much everyone is going to retire at some point. And retirement can be expensive, with those huge medical bills and no income. However, financial planning is not something they teach in college. Hence, most young earners do not think about it till their responsibilities are staring them in the face.\u00a0<\/span><\/p>\n

When I started earning, the first thing I did was to start an SIP<\/a>. I had been managing my parents investments, and this taught me a lot about mutual funds<\/a>. Since I was employed outside my home city, I could meet my college friends only occasionally. When we did manage to meet, I would ask how they are investing their money. And I would invariably get one of two responses, \u201cwork is too hectic, I just don\u2019t have time to think about all that. The money is just lying in my bank account<\/em>,\u201d or \u201cI\u2019m not earning so much that I can start saving right away. I\u2019m hardly left with anything at the end of the month.<\/em>\u201d<\/span><\/p>\n

Very few of my friends started saving in the first couple of years of their careers. Most of them wanted to enjoy life to the fullest and not think about savings and investment in the initial years. As a result, two years after I started working, I found I had more savings than some of my friends who\u2019d found higher paying jobs than me.<\/span><\/p>\n

So what was the difference? Apart from the fact that I knew financial products better, the other difference was that I was living outside a city. Unlike most of my friends, I had taken up a public sector job, which required\u00a0 me to work in some remote areas. There, I had fewer opportunities to spend money and practically zero peer pressure. There were no expensive restaurants or bars in the vicinity and most of my colleagues were over 40 years of age. So I ended up saving a lot more than my friends.\u00a0<\/span><\/p>\n

Over time, I have moved to different jobs and understood what peer pressure really means. While my expenses shot up after moving to a city, I never stopped saving. I always held lofty targets for my investments and mostly managed to fulfil it. While I do spend money on restaurants and trips, I only spend what I have after fulfilling my investment targets.<\/span><\/p>\n

I maintain a sheet where I put my target and my actual investments for every month side by side. This helps me know if I\u2019m meeting my goals. If I fall short by a small amount, I try to make it up in the next month by curtailing my expenses. When I fall short by a large\u00a0 amount, I analyse if my target is unrealistic or I\u2019m spending more than I should. This simple task allows me to always fulfil my investment targets.<\/span><\/p>\n

Socialising is important, and sometimes it is good to treat yourself for all the hard work you do over the week. However, it\u2019s also important to keep track of your longer term financial goals and keep working towards them. You can start small and increase your investments every year. This will help build discipline and inculcate the habit of saving.<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"

Raise your hands if you\u2019ve been to an expensive bar\/restaurant you could not afford, simply because your friends were going. Raise your hands if you went on an unplanned trip because your friends asked, even though you didn\u2019t have enough cash. 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