The much-awaited festive season comes to an end and it has managed to rekindle hope and bring a lot of joy despite the restraints this year. The sounds may be missing, but the colours were still there in all their glory – the beautiful rangolis, houses adorned with marigolds, diyas burning bright – these are some of the memories you carry with you as you fold your silk sarees and put your jewellery away. Yes, there is hope amidst all the gloom! Over and above this joy, there are some lessons I learnt this Diwali from the exaggerated effort to make the festival count, and not allow it to be a washout like most other festivals this year.
Diwali has always been the most exciting time of the year and preparations for the festival start much in advance each time. The customary “Diwali cleaning” is something I usually delegate to the willing and efficient housekeeping staff and am usually pleased with the result of a superficially extra-clean house for a few weeks. This year, I decided to do a lot of the customary cleaning myself and was surprised to take away some financial lessons from this exercise.
Be personally involved to see some real change
Like I mentioned earlier, I had always been delegating the cleaning to our staff. They always did a good job. But essentially, all that they did was clean the dust and give all the surfaces an extra shine. However, cleaning should lead to decluttering, but the staff could not identify the clutter and identify stuff that had outlived their utility or others that were stored and forgotten. When I got personally involved, I recognised stuff that had been in storage for years and would possibly remain there in the hope that someday they may come handy. I was amazed at the number of things we were able to donate, recycle or throw away.
Think about it, your finances are in a similar state, aren’t they? There are investments made long ago, in all probability without a plan, the physical paper filed away and forgotten. There would be insurance policies which you took only to help a relative or friend and continue to service faithfully without giving it a second thought. The stuff you invested in to help your banker meet his target!
They all may or may not make sense in your current scheme of things. To add to the confusion, you have various people you deal with – the insurance agent, the banker, the mutual fund distributor, all blissfully unaware of your investment with other intermediaries. It would be totally worth your time to be involved, take the help of a professional, to bring it all together and tie it up to your goals and plans in life. But the key is to be personally involved since you are the one who understands your situation and the onus is on you to ensure you communicate and seek clarifications, so that your investments and plans remain relevant.
Go the whole hog
When you are in the process of decluttering, you come across stuff that has sentimental value, and there are things that you know may come handy at some point of time. Somehow, I end up stashing away some tiles or plumbing supplies, knowing that they will be useful someday, though have never been able to recollect where I have stored them when I needed them! I invariably end up buying afresh. But getting rid of these things is a very difficult decision; the ‘what if I need it tomorrow’ thought crops up in your head again and again and you compromise saying let me get rid of one part and retain the rest.
This happens with your investments too; you may have invested in a few stocks or thematic mutual funds that did not pan out the way you thought they would. But you still hold on to them, sometimes because you try to recoup your losses. At other times, you keep looking for information to validate your decision to buy in the first place and believe you were a bit ahead of times and that things will turn around soon. Your fear: “what if I sell it now and it starts performing as soon as I do?” If the investment does not make sense, it would be a good idea to get rid of it fully and not in bits and pieces. The clarity you get in the process of pruning your investments can be very satisfying.
Involve your family members, for you will need them
This is something I learnt from experience. I set out to declutter all by myself, and while I had a plan, it was known only to me. I would allocate an entire Sunday morning to cleaning the kids’ room, only to find a lot more unnecessary things added by the next week. It was like filling a leaking bucket. Nothing ever got done. When I had my eureka moment, I discussed the plans of cleaning and decluttering with the family and updated members on the progress made; I even assigned tasks to everybody and suddenly things started to work smoothly. They were not only conscious of keeping things clean, but even started to help by taking responsibility for different corners of the house.
Time and again we see customers who have a lot of clarity in their minds on how they would like their financial future to pan out. But they forget to communicate the same to their family. In some extreme cases, we have seen spouses pulling in opposite directions, with one of them wanting to be conservative and save for tomorrow and the other desiring to live in the moment and up their life-style constantly. Nothing ever gets done. It is so much easier to exchange ideas and discuss dreams for your financial future with family members and ensure that they are on board, thus leaving little room for misunderstanding and regrets.
Don’t fill all areas, leave some empty spaces
We have quite lot of storage space available at home, but every cupboard was filled. When we got new stuff, we had to really rack our brains on where to store it. This time around, we decided to leave a few shelves on each cupboard empty, and not even keep things temporarily in those places, since these would help us allocate cupboard space to guests.
Similarly, with money, it is not always necessary to liquidate only when you have a very exciting opportunity to reinvest. It is a good idea to liquidate investments when they do not make sense and hold on to the cash in liquid funds, so that you can invest when an opportunity that is line with your plan arises.
The entire exercise of decluttering can give you clarity and focus and that leads to happiness and peace of mind. But you need to bear in mind that it is a periodic exercise and you will have to do it consistently to be on top of things. Doing it once and believing you are all sorted will be a huge folly.
(The writer is a Certified Financial Planner and Founder of Finwise Personal Finance Solutions)