Investment Habits: It is said about any journey that no matter how long or short it is, it always starts with the first step. The same thing applies in the case of investment and savings also. Investment (Investment Tips) The journey also begins with the first step. But the first step is the hardest for most of us. It is said about investment that it is not the big efforts you make at the last moment that matter, but the small efforts you make regularly. Small investing habits are very powerful because when combined with consistency and focus, they can make a difference in your life. But do you know what is difficult in this path? Stick to your plans and goals.
How to stick to healthy habits?
According to James Clear, author of the book 'Atomic Habits', habits are made up of cues, cravings, responses and rewards. To start a new habit, we have to change the process.
1.) Hint: If you want to start a new habit, make it easy for yourself to “take action” at the decision point. For example, if you're planning to start running, keep your running shoes near your bed at night. So, when you wake up in the morning, the first thing you will see are your sports shoes, which will motivate you to run.
2.) Craving: Associate the habit you're trying to form with something you love doing. Make the process enjoyable. Assuming you like listening to music, then carry your headphones and listen to music while running.
3.) Response: Make the new habit easy to follow, like setting a goal of running for 15 minutes.
4.) Reward: Reward yourself for maintaining your habit.
This is also true for financial matters.
take early retirement
The life you want to live could be retiring early or retiring with a large corpus. The first step towards your retirement planning is to first know your current expenses, second to know when you want to retire and third to know how much money you will need when you retire.
Assuming an inflation rate of 6 percent, if a 30-year-old person wants to retire at the age of 58, and the current monthly expenses are Rs 50,000/-, that person will need Rs 5.21 crore at retirement.
This amount may seem huge now, but habits can help you save for your retirement. The best financial habit that can help you achieve your goal is Systematic Investment Plan i.e. SIP.
How will SIP help in achieving the goal?
Systematic Investment Plan (Sip Investment) Helps you invest a small amount regularly in a mutual fund scheme of your choice. SIP helps you maintain your healthy investment habits by creating a hassle-free, automated process. Small amount does not weigh heavily on your pocket but gives you ease and confidence.
Looking at the earlier example, to reach a retirement corpus of Rs 5.21 crore, an individual would have to invest Rs 21,723 every month for 28 years assuming an XIRR of 12.93%. Thus, the task of building a large fund was simplified to a small manageable step.
SIP forms a healthy investment habit, know how?
1.) Hint: Investment is automatic. Setting your SIP trigger date closer to your salary day helps you invest without the fear of spending extra money.
2.) Craving: Checking the amount being deposited every month and knowing that you are the one making it possible is attractive in itself.
3.) Response: Having a lock-in period can help you stick to your plan for a longer period.
4.) Reward: A comfortable retirement is the reward you have been looking for.
(Author- Suresh Soni, CEO, Baroda BNP Paribas Asset Management)