Goals First. Investments Next.

Here’s a question that I often receive —

Hi. I’ve recently started my career at a software firm. I earn Rs XX,000 per month. Being new to personal finance, I’m not aware of investment options for beginners. Could you please guide me towards suitable investment options?

Whenever I see such a question or an equivalent variant, my first thought is “Oops! Wrong way to approach one’s personal finances.” Investing is a worthy cause, but what are you investing for in the first place? Do you want to buy your first vehicle? Do you want to clear your education loan? Do you want to double your money overnight? Every investment that you make has to be driven by a “Why?”

It’d be very easy for me to blindly ask you to put your money in a balanced mutual fund or in a dividend yield fund or in the public provident fund. But without knowing that “why” you’d end up putting your money in the public provident fund when all you wanted to do was to save some money for a down payment on your bike.

So, sit down and identify your [financial] goals first (here’s a great starting point). Investments come much later.

And if you currently have no idea what you want to invest for, I’d recommend that you simply open a 1-month fixed deposit each month and keep renewing them till you figure the “why” out. By then, you’d have learned to save, to invest, to earn interest, and to make your money work for you.

Finally, I’m not sure if this problem is specific to the software industry — too much money too early in one’s career and no clue what to do with it all.

What do you think?

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