Indian culture handles fitness and finance in diametrically different ways. Our societies love to discuss, dissect and talk about our fitness, whether it’s asking what we ate to commenting on our bodies, but when it comes to finance there is complete silence, almost a stigma around it. That’s probably why Indians have one of the most sophisticated and nuanced approach to food, but are flying blind when it comes to their finances. However, physical well-being and financial well-being are similar in approach, and drawing analogies from one can help shape our thinking about the other.
Budget like you diet: We manage our diet to assess how much to eat on the basis of our fitness goals, choosing between food groups and options available. In personal finance, this is budgeting where we take control of how and where income is used, understand goals, priorities and allocate accordingly.
Plan investments like workout routines: Investments are so complicated that hearing the word makes us run to someone else to make decisions for us. Experts are like personal trainers, they can force accountability, but the decisions we make are our own.
Just like with food, all investment too is goal-based. What are the outcomes we want to achieve? Someone with the goal of retiring on a beach at 40 would have a very different path than someone who wants their company to IPO at a billion dollars. Once your goals are clear, define outputs just like you would with your workout. Which specific muscle groups do you need to work on to achieve the desired outcomes? In the financial world, this involves creating a specific portfolio that will help achieve goals.
There are two main types of investment instruments you can use – Debt and Equity. Debt instruments which include corporate or government bonds, treasury bills, etc., tend to be less risky but offer lower, more consistent returns. Equity instruments such as stocks, mutual funds etc are more risky and volatile, yet offer higher, less consistent returns. Think of these options as cardio and weight training, both fall under exercise and help us achieve the physical goals we want, but their approaches are different.
While putting together a portfolio, don’t forget to consider your risk appetite and profile. A professional athlete will have different tolerance compared to a 35-year-old office-goer. Young people can push themselves harder than those with chronic back issues.
Lifestyle choices make all the difference: Apart from food and exercise, the choices we make every day, the habits we build and the identity we associate with looking and feeling good contribute to overall wellness. Similarly, the choices we make on where we invest every rupee – even that which we spend – contributes to the quality of lifestyle. If we have Rs 5,000 to spend, would you do it on a movie night or on dinner and a museum visit? Smart lifestyle choices set us up for a better life, just like smart wellness choices put us in the right headspace to feel better. The 10% extra you pay for organic tomatoes feels like a long-term investment, which it is. Similarly, before you spend, think about whether it’s a smart long-term choice. CRED creates opportunities for these smart lifestyle experiences which members access by spending coins.
Measure what matters: Once you’ve set a program of inputs and outputs, monitoring and tracking on a daily basis is important. Fitness KPIs operate just like financial KPIs in that real-time visibility into the state of our finances gives us the information that nudges smart choices. This tells us how much cash we have, the value of investments, our spending patterns and where we can potentially reallocate. This is tough because a lot of financial data is buried in fine print or somewhere in statements that we never open. We realized how unfriendly it is to review personal financial metrics, and that’s why at CRED we make it really easy to see the exact status, spending patterns and hidden charges real-time.
Keep your eye on the (long-term) prize: There are some core behavioral principles that make smart income, investments, credit and lifestyle choices easier to follow, and reflect that for our bodies and our wealth, the well-being mindset has the same elements – goal-setting, discipline and moderation.
Getting a gym membership in January and forgetting in February does nothing for your fitness. The same outlook should be extended to managing your finances, where it isn’t a once in a year exercise that you resolve to work on- mostly during new year’s eve or tax season. Be consistent in mapping, tracking and budgeting in order to ensure you are aware of your financial situation and informed to make the right decisions.
Short term goals are just that – short term. So when looking at your mental and physical wellbeing or finances adopt a broad, long term outlook. Start with outcomes, think about the output metrics that will get you there and finally identify and work on the right inputs. Money and financial fitness is an output that lets you achieve the life you want, and everything related to it is just a tool that is available for you to make informed choices. If you’ve already shown the commitment to get your health in order, you’re a step closer to financial fitness because the same principles apply.
DISCLAIMER : Views expressed above are the author’s own.