Investment is Important but Not before Savings

 In one of the Whatsapp groups, a member had shared a forward. An image that had all the crises world has faced in last 2 decades and the footnote on the image went on to say that Mr. Market is above all and has overcome all the challenges and given good returns and that we should "Invest" no matter what. 

  We agree with the image and the footnote albeit with a pinch of salt. Mr. Market does not move in a linear, upward curve. Mr. Market puts the prospective Investor to test -

  • With its mighty volatility, 
  • With its boring consolidation, 
  • By doubling the Investment in couple of months, making you feel greedy and 
  • By giving you a false sense of "Financial Nirvana"  before throwing you to the ground and burying you once for all! 

Yes, indeed, Mr. Market is above all. Some of you might feel that we are exaggerating. True, may be! But What are alarm bells if they don't ring louder than the impending danger? Exaggerating suits if it has awaken you. Now that you are awake - Let us tell you - Loud and Clear - 

Investing is Important but not before Savings. Saving is the 1st step towards Investment. 

Some of us might confuse between Investment & Savings. Isn't Investing & Saving the same? Let me quote our Business Law Professor - "If they are same, then why different words?" Ahem... 


No, they are not same. "Investment" helps you Grow, Savings save you from tight situations. Finally to the moral of the Blog - We advice our readers that before they "Invest" in anything, they should make sure they have ticked the below Savings (in the same order)- 

1. Paying off Credit Card Over dues- A lot of us might be meeting our monthly Expenses with Credit Cards, basically rolling over expenses to the next month untill a time where we are not able to pay at all. Ensure that you are not using your card to roll over expenses. Use Credit Cards wisely. 

2. Pay off Personal Loan - If you have a personal Loan, try and pay it off next. 

3. Pay off Excess Housing Loan EMI - In the desire of having a big lavish house, we at times end up with a huge Home Loan EMI, if your loan EMI is more than 40% of your Income, Next try to level it to 40% of your income.  

4. "Save" up for your Annual Expenses - Health Insurance, Kids' School fees, Family Vacation, Car Insurance.. some of the examples of recurring Annual Expenses. Put a portion aside for these. 

5. Building a Emergency Fund -  Next try and Build a fund that is minimum 3 times and maximum 6-12 months of your monthly expenses that includes your EMIs, Rents, Utility Bills, Food, Fuel Expenses and any other expense that is a standard in your monthly budget. 

Once you have crossed all these, then only should you think about "Investing" your money.

Please understand that Investing means locking up your money in an asset class that will 

  1. Ensure Safety of Capital
  2. Provide a return on capital higher than Rate of Inflation.
Hence buying a life insurance Policy, being a part of Chit fund, speculating in shares/cryptos do not qualify as Investment neither does Investment without a proper saving in place. 

Hope you are better prepared to handle such forwards.. With the New Year around the corner... Wish you all the best to start the New Year, a Little more Wise, Little more prepared and a Little more hopeful...

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