Financial resolutions for 2022- The millennial way

In a country where most conversations on investments and building a financial reservoir have traditionally revolved around assets that are safe and carry no risk, it may be a tad challenging for the younger generations to move away from those preferred asset classes.
Avoid taking investment decisions driven by emotions.
Avoid taking investment decisions driven by emotions.
Published on Jan 19, 2022 03:54 PM IST
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ByHT Brand Studio

The ritual of making new year resolutions can evoke mixed reactions – while the start of a new year fills you with hope about new possibilities and all that you can experience and achieve, it is also natural to feel a prick of guilt and regret at all the ‘what ifs’ at the year gone by. The new year has arrived and while it may have brought with it myriad resolutions, many millennials are waking up to the realization that the ‘New Year New Me’ has many flaws.

It was this realization that a change in date does not make it easier to change one’s habit or develop new ones that led Shrey Sinha, a 30-year-old management consultant, to be more mindful of his to-do and can-do lists for the new year. “I used to be pumped up at the beginning of the year with a commitment to a bunch of lofty goals – eat clean, exercise regularly and the likes. After the first few days, my enthusiasm would fizzle out and I would go back to my old habits. I would also tell myself that I would manage my finances in a completely different way and that too would become an incomplete endeavor as I would go back to my old ways,” Sinha says.

It was this vicious cycle of motivation and demotivation that convinced Sinha that he needed a different approach to make the resolution exercise a success. “Previously I would fallaciously give in to the idea that it is indeed possible to overhaul my habits and my lifestyle in a few days. I would hit the gym on Jan 2 only to never show up again after a few weeks. This year I realised, it would be more fruitful to make small incremental changes than develop completely new habits. For example, I realised it is more doable to hit the gym four days in a week and gradually increase the frequency instead of aiming to attend sessions everyday,” states Sinha.

Self-awareness can be your guiding light

That maintaining practicality and mindfulness can be the key to setting realistic financial goals too was something Sinha also realised in the process. Sinha says, “The millennial demographic has too many distractions – there is just no limit to the list of wants and goals. Plus the hustle culture narrative and the obsession with motivation that this generation has makes it hard to be realistic when it comes to resolutions too. But the only way to make your resolutions a success is to be honest about your existing abilities. This has helped me significantly on the financial front.”

Sinha feels confident that he can achieve a chunk of the financial resolutions that he has made for this year. He explains, “For the first time I have broken down my goals into a bunch of smaller actionable items. I have also created a flowchart to stay disciplined – like paying my EMIs, credit card bills and keeping aside money for my emergency fund and my mutual fund SIPs before making any expenses. I have also decided to keep one day of the month for reviewing my finances and keeping my financial advisor in the loop should the need arise. As far as outflows are concerned, I have religiously started jotting down every expense and while it has only been a few days, I can already vouch that this habit has made me a little more conscious of where my money is going.”

Moving away from stereotypes

In a country where most conversations on investments and building a financial reservoir have traditionally revolved around assets that are safe and carry no risk, it may be a tad challenging for the younger generations to move away from those preferred asset classes. Fixed income instruments, gold, real estate may have been the preferred investment routes for the older cohort of retail investors and it is common for many millennials to have investment approaches heavily coloured by them.

Preeti Zende, founder of Apna Dhan Financial Services advises not giving in to the pull of such asset classes.” Think beyond recurring deposits and fixed deposits as investment options as they are not inflation hedged. The equity asset class is the only asset class that can generate inflation hedged returns in the longer term. Do not consider the Share market as a Satta bazaar. Rather consider it a place to make fortune with a calculated risk and patience,” she says

Zende also cautions against the sheen of real estate and gold. She says, “These are ill-liquid assets. I see many millennials sold by the idea of buying houses early on in their career and then being burdened by high EMIs. Rather, the focus should be on first establishing a solid financial base comprising liquid assets and then going for physical assets.”

Zende further narrates, “Identifying your goals and mapping each investment with one of your goals should be sacrosanct. Investing randomly should be an absolute no-no. Do not blindly follow the investment advice of your friends, colleagues, or relatives. Things that worked for them may not work the same way for you. Make a customized financial plan for yourself as per your risk profile, investment style, and requirement.”

Key takeaways

- Before investing, never forget to analyse your risk-profile. Avoid taking investment decisions driven by emotions.

- Maintain a watchful relationship with debt – it can be a boon at certain times but care should be taken to not let it affect other areas of your finances.

- Keep aside money for emergency fund and mutual fund SIPs before making any expenses.

- The equity asset class is the only asset class that can generate inflation hedged returns in the longer term.

This article is part of the HT Friday Finance series published in association with Aditya Birla Sun Life Mutual Fund.

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Wednesday, May 25, 2022