The Money Wellness Studio

  • What on God’s green earth is a deposit?

    Okay. Here we go.

    Think of it as a piggy bank but on a small dosage of steroids. Like a bulky little piglet walking around a farm. That’s your deposit.

    The reason it’s just a small dosage of steroids is because the interest rate the banks are providing for deposits are quite low these days. Gone are the days when we could open a ‘Fixed Deposit’ or an FD and set sail into the sunset.

    Yes, I will keep adding photos that give you a break from this super dry topic

    When you have a relatively large amount sitting around, you could put it in an FD (Fixed Deposit) which will slowly gain some interest over the time that you have put it away. So you can say put 50,000 in an FD for 12 months and after that you will can either continue the FD (renew it) or encash it into your account.

    We need so much more now, but because a fixed deposit doesn’t provide the a great interest rate, that does not mean we shouldn’t use it at all. This is where the risk averse will park the short term savings. Short term meaning, something that you will need in the next year or two.

    Before I get ahead of myself, there is another type of deposit, it’s called RD or Recurring Deposit. This is where you transfer a fixed amount of money in every month for a pre-determined period. And at the end of the period, you receive the total amount. For example, you can transfer Rs.1000 every month for 12 months and at 6% interest rate and you will receive a total of 12060 at the end of one year. ‘So I just made 60 bucks?’ Erm, Yeahhhh. But you actually saved Rs.12060. It could have been ‘0’. Kachinggg!

    One thing that I do is use fixed deposit as an Emergency Fund. So wait, here is what I did. I calculated that I needed around 300,000 for the 6 months. Started a recurring deposit that transferred around 10,000 every month for the next 2.5 Years. End of 2.5 years, I had 300,000 for my emergency fund, which I immediately moved to a Fixed deposit. Now it just sits in one corner raking up interest and growing while I do other things with my money.

    I do not advise you go this route for long term savings because you barely break even given that the rate of inflation is higher than the rate of interest in some banks. This should be for your short term plans and perhaps your emergency fund.

    Come up with a plan for yourself, and if you need company doing this, reach out to me at svr@thewellnessstudio.com and we can do it together!

  • Budgeting for cupcakes

    Investments! Nooooooo! Too scary. Should we think of a code name for this then? How about cupcakes? Cool?

    ‘I have an emergency fund, I’ve thought about my retirement, I am also insured for heaven’s sake – I’m a fully functioning adult now’

    Till now, the only thing we have actually accomplished (yes its a lot but still), is building a safety net. We have not yet embarked on ensuring that our money is working for us.

    Thats why we need…cupcakes!

    First thing we HAVE to learn about cupcakes is the mindset with which we approach it. We need to kind of break down the psychology behind being scared of it, and inculcate it into our lives. Like how we pay our bills every month, or wash our clothes regularly, this is nothing more than a habit that we need to build. As I have said in my introductory article, it can be daunting to start this out, but once the set up is completed, we can automate the whole thing so we don’t even have to think about it anymore.

    Ok how to set this up? What kind of cupcakes can I buy? They seem like they’re only for rich people or finance people walking around in suits all day.

    Before we get into that, we need to set a budget, we talked about it a little when we went over emergency funds and making room for your savings, but let’s dive in a little deeper.

    What do we need to draw out a budget? What are your goals? I have a worksheet prepared that will help you think about how you can tailor your budget according to YOUR needs.
    Fill it out, its an ongoing list and will change as you think more deeply about it!

    Goals Questionnaire Template

    These are all exercises that I encourage you do to in order to come up with your own plan. It’s not a one size fits all model.

    Ok this seems a little daunting, you don’t need to get out an excel sheet just yet. Lets distill this even more, here you go –

    Let’s just take the day and think about our goals and our recurring expenses. Put pen to paper and to really see them, and then you will understand what your next steps need to be.

  • Hedge! Hedge! Hedge!

    Its going to get morbid sonnnnn!

    Get insured! I’m not a walking talking insurance advertisement. But it’s incredibly important to get insured. I am not talking about the life insurance policies that people sometimes mistake for ‘investments’. Nopedydope.

    Look for a good term insurance. The sum assured is higher, and yes you don’t receive anything if nothing happens to you during the term (like the next 40 to 50 years), but like I said, this isn’t an investment, this is a back-up. So yes, there are other term insurance policies wherein you do get a sum assured. You need to shop for something that fits you well. Again, this is in NO WAY an investment.

    Its also relatively less expensive than getting a full blown life insurance policy. This is boring me as I write it, I can only imagine what you’re going through. Bare with me for a little more while, I’ll try and keep this one short.

    Couple of things to keep in mind for term insurance policies,

    1. The younger you are, the cheaper it is. Meaning, the older you get…the more expensive it becomes. Tick Tock!
    2. If you smoke, you pay more
    3. If your BMI is high, you pay more (Yes, BMI is not the best measure of health, but thats the way it works in the insurance business)
    4. If you have any other health conditions, you pay more.
    Goddamn, all these conditions, and yet – I’m asking you to get a term insurance. What gives? Because of the total amount your family gets if something happens to you is UNMATCHED compared to other insurance policies out there. And if nothing happens to you, then hey! Thats great news, you survived! Go retire in some happy beach town and chill.

    In 2019, someone in my family was diagnosed with cancer. That news was incredibly hard to digest, and the stress it put on my family was immeasurable. The hospital bills as you can imagine were astronomical, and we could only afford the treatment because we had a rock solid medical insurance. If you’re employed then make sure you are covered from your job. But I would insist that you get a separate medical insurance for yourself and family if possible. In case something terrible happens, you don’t want to weigh your decisions against how much money you have.

    In case you’ve gotten this far, the family member has completely recovered now and is in remission. So I’d like to end this rant here. Thats all! Get insured, stay healthy!

  • The DREADED PROVIDENT FUNDS

    Done! I’ve set up my Emergency fund! Fantastic.

    You will now be able to afford your life if you get laid off for the next three months at least. I’m guessing if you’re reading this, you’re employed on a salary. Let me ask you this, when was the last time you looked at your payslip? How much tax are you paying? How much is going into your Employee Provident Fund account? What the hell is an Employee Provident Fund account!

    I implore you to think about your retirement. ‘Erm. I’m 25. Why would I need to think about my retirement right now? I have all the time in the world.’ Yes. Yes child you do. Which is why you need to take advantage of it! Time is key to compounding.

    First, if your employer offers you EPF (Employee Provident Fund), then get the details of your fund! Go to the EPF website, check the member passbook and see how much you have! This is absolutely important, you HAVE to know this. You might have an insane amount sitting there without even knowing you have it. Very important – Add nominee details to your EPF account! If something happens to you, you need to specify who inherits it.

    In your payslip, find the amount that you put towards EPF, the employer usually matches this amount. So you’re putting X amount and your employer is putting in the same amount. End of the month you have 2X in your account.

    Ok imagine this. Your mom says that if you are able to save a 100 bucks a month, she will match that amount and give it to you. So end of the month you have 200 bucks. So now you’re actually getting a hundo, free! This is the Employee Provident Fund. – you put 12% of your basic salary and this amount is matched by your employer.

    That was a lot. I get it. Go get some chai. Take a break, I’ll wait.

    Ok feeling better? Retirement, let’s get into it.

    I know I used a 25 year old as an example above, don’t fret if you’re older and if you haven’t begun. It’s better to start than sit and shake in fear and put it off for another day.

    How much will you need for your retirement? Yeah this number is going to be huge and daunting. It depends on when you want to retire. The general advice is to multiply your annual spending by 25. So you’re earning Rs 4,00,000/year, then you’ll need Rs 1 Crore to safely retire. We don’t need to know the exact amount, we just need a ball park to get started.

    Again let’s break it down into small bite sized pieces. We don’t have to save this behemoth of a number RIGHT NOW. It’s over the period of your life time. You literally have all the time to do this.

    There are multiple avenues out there that can help you with this. We can start with the simplest. Open a PPF account. Yes, open a Public Provident Fund account. You can save up to 1.5L every year and this has a fixed interest rate and is tax free. The current interest rate is 7.1% (in 2022). But this will just be a part of the retirement chest that you build for yourself.

    Figure out how much you can set aside for your PPF. The minimum has to be at least Rs.500 a year. Again, do not worry if all you can do is the minimum, its a start!

    You already have an emergency fund, now you have some amount that is left over every month with no purpose. So what do we do? We take a part of that amount and move it to PPF. If you saved 5000 every month, then move a part of it, say 1000 to the PPF account every month.

    Ok how do I figure out how much of my savings goes into the PPF? I would recommend you to think a little strategically here. PPF is a safe option. You want to invest in it so that you have guaranteed returns even if the interest rate is low. If you are able to afford the whole Rs.12,500 a month (adds up to Rs 1.5L a year) then nothing like it. Go for it! But if you don’t, then think about it. You want to be able to afford to a lot of things with the money that you have saved, including investing it in the market. So perhaps, do a 50-50? Write to me if you need help figuring this out.

    ‘This is torture’. YES. But again, we are looking at this through a really really wide lens.

    Talk to your bank, or check your mobile app. Most of the private banks have an option for you to open a PPF account through your mobile app itself! I opened mine through my app.

    Set up a calendar reminder to move the amount to your PPF account every 1st of the month.

    OR (and if you’re not tired already)

    1. Set up an RD for the monthly PPF amount, let it debit from your account automatically every month for the next twelve months. (Do it on April 1st if possible, but don’t worry yourself to death if you can’t).
    2. Once the RD matures (hopefully on April 1st of next year), move that amount to the PPF account. This way you get a little bit of interest on the amount you’re putting in, and you only need to do this once a year.
    3. Every year you need to setup an RD, and every year you need to move the matured RD amount to the PPF account. ADD this to your calendar!!

    Aaaaand you’re done. Get hold of a friend to get through this process if required. Reward yourself after you do this. Go out for a walk or head out for coffee/beer. This was indeed a humongous task.

    ***Do your own research about PPF – couple of facts – this is NOT your emergency fund! You cannot pull out the money as and when you need it since it’s locked in for the first 7 years after which you can withdraw partially. You can only withdraw the entire amount only at the end of 15 years. You can also continue the PPF account post 15 years, you need to fill out a form called ‘Form H’ and continue to keep the account without adding any more deposits, or continue to deposit money in it by extending it every five years.

  • I have an Emergency!

    Kay. Thanks. I already have a bank account and a mobile app. Now what?

    Awesome! This is India specific – get your Aadhar card connected to your mobile phone! Everything happens through OTP (One time password) these days, so your mobile number needs to be updated and connected to your Aadhar because thats how most investment platforms perform their KYC (Know your Customer). This is a manual process, so you HAVE to go to the Aadhar center personally and get it done. I understand that this is easier said than done, but please do it. It’s a one time effort and opens many many doors.

    Now that the above technicality is out of the way, let’s talk about how to make this happen. How do we motivate ourselves to save? to invest? Everything is so daunting AHHH.

    People, it’s a feature not a bug.

    We need to get around this. There is no need for motivation here, we just need to set up systems in place that will automate the living hell out of your money. You have to set up processes in such a way that your money works just as hard, if not harder than you.

    Why should I even bother saving or investing? I’m making enough money, I’m happy. I’m not a capitalist. Yeah, me neither. But we live in a capitalist society and we are bound by its framework.

    1. Things are going to get more expensive (Hello Lifestyle Inflation!)
    2. You WILL have additional responsibility as you age.
    3. There are expenses that are unplanned, or will be too big to cover using just your salary – Loans!! (We take loans all the time, there’s nothing to fear here. But there are certain things that you cannot avoid taking a loan for – education, house, vehicle, setting up a business etc. There are things where loans can be avoided or the situations can be mitigated – personal expenses, medical expenses, emergencies, etc.)

    Most important contingency that you need to build is an emergency fund. BORING! Heard this a MILLION times. Okay, have you done it though? If not, why?? Think about this for a second, why does every financial ‘guru’ and their mother go on and on about Emergency fund? Why do they throw this fact around all the time?- ‘An American cannot fund a $1000 emergency expense’?

    Imagine getting into debt because of an emergency? You are already under incredible stress. You are also adding lack of funds to it. What will you do? If you’re privileged or lucky, your family and friends may help you out, but it is another ticking time bomb. Or what? You may have to apply for an emergency personal loan? Or a payday loan? Or max out your credit card? Rake up interests there?

    All the above sound horrible. What an insanely stressful time this is turned out to be!

    Good Lord, get an emergency fund! It’s nothing special. If you’ve gone through my previous post, then you know the different buckets your expenses fall into. Figure out how much you spend in a month start setting aside money for at least 3 months of expenses.

    Lets say you spend (this is all arbitrary)-

    Rent – 10,000

    Groceries – 5,000

    Social/eating out – 3,000

    Travel cost – 2,000

    Total – 20,000

    So you need 20,000 times 3 —> 60,000 saved. (Just a minimum. . . if one can, one must do more)

    Let’s say you are able to save 5,000 a month. So save that 5,000 for the next 12 months. Automate this. Set it up now.

    Too much? Let’s put it down step by step

    Pretty steps to distract you for a second.
    1. Figure out your recurring expenses per month. Whats the total? Check previous months to see if that total is consistent. Don’t worry about how much it is, the only thing you need to do now, is jot down expenses, get the total amount.
    2. You need at the minimum, 3 months of expenses. Depending on what you think you need, choose your multiplier. You need 6 months of expenses in your emergency fund to feel safe? Then go with that, but let’s keep at least 3. What is the final amount you get?
    3. Now pause. Check how much you save. If you don’t save anything at all, then plan for it. Write down the least amount you can possibly afford to save. You have to come up with a number, it doesn’t matter how big or small it is. What is this number?
    4. All you need to do now is save that amount that we figured out in Step#3, every month – till you reach the ‘final amount’ we figured out in Step#2. Make it the 1st of every month. This amount cannot even see the light of day. Nope, it goes straight out.
    5. Set up the Recurring deposit. What in the world is a recurring deposit? Every bank in India has an option for a recurring deposit. It just removes (debits) a certain amount from your account into a separate account (credit) for the number of months specified by you. So basically you’re instructing your bank account to remove ‘X’ amount -which we figured out in Step #3, every month from your spending account for a certain period of time.)
    6. How long do I do this recurring deposit (RD)? Divide #2 by #3 – you get the number of months.
    7. Set it and FORGET it. It’s not yours anymore, it’s for an emergency ONLY.
    I don’t need to do all this, I already have enough saved for an Emergency Fund.

    That’s great! Put it in a different bank account so it’s out of sight and out of mind. It cannot be spent on frivolous things.

    I save quite a bit every month and I can get it done faster than the terms Recurring deposits in my bank are offering. Phenomenal! Add a calendar alert to send out that money to a separate account on the 1st of every month. Yes you do need to have another account. It needs to be easily available. Check with your bank if there is a way to package this inside your own account.

    This is taking wayyyy too long. I’m bored already.

    I hear you. But this is a one time thing you need to do. Not going to lie, this is a snooze fest. I would suggest you do everything in your power to make it interesting.

    • Get a trusted friend or a family member to help you stay accountable.
    • Schedule it! Put it on your calendar and block your time to just do this. Eat the frog!
    • Break it down. If it’s too overwhelming, just do step#1 one day, step#2 another day.

  • Making room

    Where to begin?

    Start with ensuring that your bank is actually at your fingertips. Meaning that it has a good mobile app, that works and is real time. There are many banks out there whose mobile app sucks, I’m not going to list them out here as I’m not endorsing any bank in particular.

    Ideally, you need to know the major expenses in your day-to-day life. Is it 30% rent, 20% social, 20% groceries…what is it? You don’t need to know where every single thing goes, but you do need to know the general buckets they fall under. You need to figure out, what are the recurring expenses that you have and make room for them.

    The idea is to be mindful about your spending and respecting the money that you earn. At the same time, think about how much you want to save every month. If thats too difficult, start with how much is left over from all the recurring expenses. Do you have 5% of your salary left or do you have 50% of your salary left? What do you usually do with it? Are you in debt by the end of the month?

    If you’re left with nothing at the end of the month, don’t panic!

    Make some room, start with an amount that is small but achievable. An amount that you will not miss. Everyone has different dependencies, so be kind to yourself even if there is nothing left at the end of the month. You are on the right path, you just need to start thinking about Future You! He/She needs you.

  • We are OKAY.

    One of the things I encourage you to do is to take a good look at yourself. You’re probably reading this on your phone/laptop?

    You’re already better off than most people on this planet. Let’s orient ourselves and acknowledge our privilege. This doesn’t mean we don’t take full advantage of the privilege that we’ve been bestowed with. But it does provide some much needed perspective. We’re good. We can be better, but we are good.

    This also helps with actively identifying people around you who don’t have the same privilege and opportunities that you do, and paving the way for them. It could be as simple as helping someone figure out mobile banking on their phone, helping someone open a bank account, walking them through the KYC process, literally anything you can do to advance their position, you should be be doing.

    Not only does it empower those people, it feels amazing. There is so much psychology behind how we deal with money, I’m shocked that we don’t talk about this more. The more you feel like you’re making a positive contribution, the more ownership you feel toward your life and your own money.

    We will get there, step by step!

  • To keeping it simple!

    When I speak to other people about money, they immediately get nervous. They don’t like talking about it. So I asked one of them, ‘why?’

    She said its intimidating, almost like there’s so much to know about it and she knows nothing.

    That’s because whenever people talk about money, they use so much jargon that it confuses the bejesus out of people. It’s like trying to explain the simple calories in calories out by talking about the intricacies of the digestive system focusing on cellular metabolism.

    No people. Let’s keep it simple. Calories in < Calories out. Thats all.

    Same with money. Expense < Income. So yeah, there IS more to it. But thats all you need to know to get started. Get rid of all the other nonsense out there. Start here if you’re feeling overwhelmed. Trust me, everyone starts here. This is the bedrock of a healthy personal finance.

    Just added this photo of a beautiful hill to destress you.

    I advocate for healthy personal finance, I know that we can be incredibly resilient to the market. We have the ability to stick it out for the long term, weathering the risks and patiently waiting for the gold to strike. Compounding is actually our best friend. She may be daunting, but she’s simple, befriend her and you’ll be all right.

    To everyone out there who think this is all too overwhelming- It’s not! Talk to more people about this or write to me! I’m always available (and extremely interested) to talk about this. Let’s empower ourselves!