WHY FINANCIAL AWARENESS IS IMPORTANT?

An aspiring businessman with a brilliant product idea wants to setup his own company. There are several areas of expertise that are required to make his business a sustained, successful venture. The entrepreneur may be very knowledgeable about the business domain, how to recruit skilled manpower, design business strategies, and plan his product’s marketing initiatives. However, if he is unable to handle the various financial aspects of his business, he is sure to fail.

Similarly, if a household is not prudent about managing their finances, how much ever they earn as income will not be sufficient to bring financial stability. They will always end up spending more than they earn. And during emergencies such as in the present times, they will face a lot of hardships without contingency funds for such situations.

The basic idea behind both these scenarios is the importance of being financially prudent. A few important aspects of financial management are listed below to help an individual/entrepreneur in their short and long-term plans.

Maintain a stable and diverse investment portfolio.

Don’t put all your eggs in one basket, that’s an old saying, but it’s a smart piece of advice when it comes to our investments. Before the pandemic struck about 2 years back, the property rental market was booming, especially in metro cities. So a lot of people put all their surplus funds into property purchase. But the mass exodus of the working population from cities has seen a sharp fall in property rentals. Another case in point is the sudden flurry towards equity markets. Since the deposit interest rates were falling continuously, there was a sudden jump towards the stock markets by small investors, especially towards IPOs. But except a handful of them, most of them are under-performing, though the market itself is quite buoyant. Property, gold, shares, mutual funds, FDs, government saving schemes – these are all good, sound investment options. But when an individual relies too much on only 1-2 of these options, the risk of failure is very high. So balance out your portfolio.

You might stand to benefit a lot if you include Chit funds as one of the investment alternatives in your portfolio. They are actually an instrument of regular monthly savings with the added advantage that the depositor can withdraw their entire investment at the time of their need, any time during the investment tenure. No penalties, no hassles. Choose a registered Chit fund house that has a long-standing reputation, and you can expect to gain about 7-9% returns on your investment with absolutely no risk.

Achieve a balance between profitability and security of your investments.

There are some financial instruments that offer attractive short term gains, but are relatively high risk, such as small/mid-cap equity stocks. At the other end of the spectrum, there are government small savings offering a moderate rate of interest but with 100% security. A good financial investment plan must include the right instruments appropriate to one’s age, family situation and future goals. For example, senior citizens prefer Govt schemes, bank deposits, chit funds and property rentals. While a young, new employee can afford to be more daring in their choices like equity stocks. Also remember, you need to compare and evaluate post tax returns, not directly at face value.

Don’t fall for hype, rely only on performance and credibility.

There are several new money making avenues out there such as cryptocurrency, online gaming, fintech companies offering wealth management options. But very few of these companies have a proven reputation and credibility to guarantee your investment.

Set aside contingency funds for emergencies.

We can’t stress on this point often enough. The importance of planning for unforeseen difficulties, loss of income, health emergencies, monetary shortfall – this is the biggest lesson that the pandemic has taught us. Whether it is getting adequate life/health insurance, or keeping aside emergency funds in some easily accessible instrument, everybody has to work out their own contingency plans. And these plans vary depending on how many financial dependents are there in your household.

Financial literacy is important.

You must make the effort to understand the way each financial instrument operates. How credit cards are billed, what are the various aspects of investing in mutual funds, how to maximize income post-taxes, what are the various exemptions and deductions that the Govt offers for small investors, how to check the credibility and safety levels of banks and NBFCs and the schemes offered. There are so many aspects to look into. A little bit of effort and research done before choosing the investment option can save you so much headache later!

Remember, becoming prosperous is not just a matter of luck. It requires a lot of discipline and effort. That’s the summary of our advice to all our dear investors and readers.

ABOUT US

Shanthala Chits has been in the business of chit funds for over 2 decades now. We are a Government approved chit fund company with a 27-year successful track record and thousands of satisfied customers. Shanthala Chits is registered under the Chit Fund Act of 1982, Government of Karnataka. We are one of the most popular chit fund houses based out of Bengaluru, known for our customer satisfaction and secure investments.

Our Chit schemes range from a monthly contribution of Rs 6000 to Rs 1,00,000 to suit every budget. You can pick a chit scheme with an appropriate monthly installment for meeting several of your short-term financial needs. Our chit schemes are for a tenure of 25 Months.

Get in touch with us and start with an investment scheme. We will be glad to help you out with the right scheme that matches your needs.