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BASL Registration Number: 1951 | Non-Individual RIA. Regn No. INA000017620 | Validity Perpetual

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What is your attitude towards money?

Updated: Mar 19

Mr. Patel aged 45 has never invested in the stock markets. He has been a silent witness to the spectacular run in the markets since 2004. The reason lies in a deep-seated notion about equity he has long held since his college days. This belief comes from the experience of his father who lost a big chunk of savings in the stock markets in the 1990s. The substantial loss disrupted the goals and clouded the family’s finances for a really long time. Since then, Mr. Patel thinks stock markets are a risky gambling den and if luck is not on your side, you can lose big. Ironically, he is a business man who does not hesitate to take risk in his professional decisions. Will you say Mr. Patel is risk averse? Not exactly. He does take risks on a daily basis in his business decisions. We all take risks, knowingly or unknowingly. But we humans are irrational in many areas of life and harbor different biases, fears and assumptions which are reflected in our financial behaviour as well. In the case of Mr. Patel, his father going broke in the stock markets left an indelible mark in his younger years. Since then, he is carrying that baggage.

Handling personal finances is not just about calculations. Keeping your financial house in order goes beyond budgeting and investing. The math isn’t enough, psychology also counts. Each one of us has got certain traits which define our core beliefs about money.

Ever wondered why certain individuals are miserly and financially insecure, even though they have enough money to lead a comfortable life? The basis of such stingy behaviour could lie in their struggling deprived background in growing up years or the family environment. Then there are individuals who equate their self-worth with their net worth. Often under societal/peer pressure to show off, they are extravagant. They will appear rich but in fact are not wealthy. They may even be living pay check-to-pay check. They will not hesitate to borrow even if it means going neck deep in debt just to keep up appearances.

There are also personalities who are greedy, secretive & suspicious about money and do not trust even their near & dear ones in money matters. There are also some people, although exceptional these days who perceive money as a taboo. Most people cannot be stereotyped under any one category. Some money traits could be overlapping in many people.

Many of these traits are responsible for making poor financial decisions. While everyone knows the basic principles of sound money management – living within means, investing regularly, avoiding credit card debt, etc., these ingrained money traits prevent people to follow them.

Most people have no clue whether they are earning enough or saving enough or investing right. How much money is sufficient?

Consulting an expert advisor can help decode your inherent money traits and challenge them. An advisor can help make you realise that they are not just hurting your financial future but limiting your potential. Like in the case of Mr. Patel, an advisor can first correct his perception about equities that they are not a betting game. They are not meant to be invested in on a random basis like his father did which is why he suffered huge losses. Investing in equities means investing in businesses which make profits and which in turn reflect in their share prices. Equity investing is risky but calculated risks can be taken by investing in a company with good fundamentals, competitive product advantage and ethical management. A financial advisor can provide a clear perspective through financial planning. And the starting point is purpose. Through planning, an expert advisor can help you in defining the purpose of earning money, i.e., setting realistic goals attached with a time frame. He can help discard those long held money beliefs and show a realistic picture of where you stand financially and where you need to go.

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