A “Financial” White Elephant In My Investment Kitty

by Vinaya HS on July 25, 2011

in Finance

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Consider this chart:

RD_Ratio_Total_Income

This chart represents the ratio of my saving/investment in one particular financial instrument to my total income each month. On an average, approximately 15% of my total income each month is saved/invested in this one financial instrument. What’s worse though is the fact that I am locked into doing this for the next few years! It seemed like a great idea when I first started it — and to give due credit, it has enforced quite a bit of saving/investing discipline in me — but I realize now that it’s a financial white elephant to maintain.

In this day when your next month’s income isn’t guaranteed, pre-locking 15% of that isn’t a really clever idea. I’ve had to sit and figure out ways and means for continuing to make a deposit each month in the event of financial adversity. 14-months from now, I will at least have the option of a premature closure available and this is the worst case scenario that I need to plan for. Thankfully, that’s the only white elephant in my saving/investment portfolio.

A Recurring Deposit at the Post Office — that’s what I am talking about.

That’s also where this quote came from:

Don’t invest in a financial instrument unless you have the financial capacity to feed it. Examples: Life Insurance policies whose premiums run into tens of thousands of rupees, high-value multi-year Recurring Deposits, and such.

What financial white elephants do you have?




Thanks for reading this article. I'd love to hear your opinion. Please use the comments section below to share your thoughts. I frequently write new articles that also cover several other aspects of personal finance including credit cards, financial goals, health insurance, income tax, life insurance, mutual funds, retirement planning, and much more. You can Subscribe through Email and receive new articles directly in your Inbox or you can Subscribe through the RSS Feed and receive new articles in your feed reader.

{ 2 comments… read them below or add one }

Ashok August 1, 2011 at 6:12 PM

Hi, I have a big Financial Elephant. That is nothing but my Housing loan EMI. NOT ONLY FOR ME. Many citizens in India.. But there is no other way to buy a house. Is there any claver idea to ignore and buy a house?? please suggest..

Vinaya H S August 2, 2011 at 7:57 AM

@Ashok:

I agree. That is a basic need. But in this case what you’re doing is more of a “saving.” My statements would apply say when you already own a house but then “invest” in a second house and take out a huge loan for that.

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