Photo: iStock
Photo: iStock

Opinion | What I would have done differently 20 years ago

If I could go back in time, I would think of my earning life with a 30-40-year perspective

As a new financial year begins, I take a walk down memory lane and remember what I did more than two decades ago and what I would do differently if I could revisit my younger self today. It was the sixth year of my career and the latest hike just made the cut to begin paying taxes. I remember the joy of the increased salary getting deflated like a balloon on hearing that taxes will actually take away most of the hike. I opened my Public Provident Fund (PPF) account that year and then 16 years later collected the corpus. You can read about that story here.

As first income earners, our first investments are usually linked to saving taxes and making it to the Section 80C limit. Several years pass for most people before the fact sinks in that this exercise is to be done every year. Year after year. The March-end rush to look for an investment to hit your money with is actually counterproductive. It benefits those selling products with high commissions because they are waiting for people who leave it to the last few days of the tax-saving deadline, to reel in with high-cost products with limited benefits. One of the most common problems in portfolios of middle-aged Indian middle class people is the kachra of multiple life insurance policies. Each year the agents will come and sell you something new and by the time you are 40, you have 10-20 policies. These people failed to see long term, looked at each year as a single tax-saving opportunity and did not look at their long earning years as a continuum.

Luckily for me, tax-saving investments got absorbed by the PF and PPF cut and I did not need to look elsewhere. But even then, there was that annual last-minute rush to get this done.

The first thing I would change if I could go back in time is to think of my working and earning life with a 30-40-year perspective, rather than just thinking of getting over the problems of that time. Every age and stage brings its unique sets of issues and the “later when things are easier" almost never comes. The flavour and intensity of issues will change, but a problem-free life is really no life. Having a long-term view to an earning life means understanding that the financial decisions you take today will be repeated each year and will have a cumulative, compounding effect on your future self. You may as well get it right in the early years rather than look back and complain about your own self later.

The second thing I would change is the way paperwork is done. Chucking papers into a pile at the back of a cupboard or in the bed box (those wonderful space-creating innovations that the geniuses in Amar Colony probably invented) is a one-time solution that does not look at the need to revisit the same process year after year. I would have got my paperwork organized and thought through in a far better manner. This is really the biggest and most crucial step. We are still some distance from a digital locker (digilocker.gov.in) for all our paperwork; it is happening but the full migration will take time. In the meantime, maintain physical files that are clearly marked. One file each for your life cover, medical cover, other covers. One each for the various investments. Real estate papers is one file. So is the loans. One each for credit card. Each bank gets a file. So does your work-related documents—letters of offer, increments. One file for bills. Another… you get the idea. Once the digilocker is fully functional, most of these files will collapse into just a few. But till then, get your paperwork in place.

And third, I would have just pulled a little harder and put in the extra few thousand rupees into my tax-saving pot in the years that I could not make it to the Section 80C limit. A new financial year begins today. Start your tax-saving process early in the year, do it with a long-term view and get your paperwork in place. Money mantras for FY20.

Monika Halan is consulting editor at Mint and writes on household finance, policy and regulation

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