Are you better off than 5 years ago?

Well, if you were in the US and I were a Pres candidate…i would have been forced to ask you this question.

Well politics aside, this is a question that you should keep asking yourself EVERY year. In case of your personal life, hobbies, work, relationships, etc. you need to frame your own questions.I do not subscribe to the thought that a person is better off and happier if he/she has more money, however, 99% OF THE people who I know work for money. So the aim is financial betterment, right? So,

However, you should also ask yourself:

“Financially speaking, am I better off than I was 5 years ago?”.

Well the questions could be as follows:

a. Has my net-worth gone up at a rate greater than inflation?

b. Has my income kept pace with inflation or beaten it?

c. Have I repaid my loans as per schedule or am I behind in making the payments?

d. Is the corpus that I am creating sufficient to meet my goals?

e. Are my investments taking me towards my goals?

f. Have I improved my returns and REDUCED my complexity in my portfolio?

g. Is my medical and life insurance cover enough or do I still to make some changes in that?

h. Do my spouse and my older kids know about my financial position?

i. Is my will in place? If not when do I hope to put it in place?

j. Does my family know about where all the financial documents are kept? Have I written a letter to all the insurance companies confirming the existence of my policy?

k. Are my nominations in place?

Of course there are many more questions…but this is a good beginning….so do make a start.

 

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10 Responses to “Are you better off than 5 years ago?”

  1. sir,
    youv raise questions which hurt a lot but implementation makes you more happy and wise!!!!

  2. Excellent. While I have a peaceful “Yes” to several, some questions made me wince. 🙂
    Thank you.

  3. why r u repeating ur articles??…subra??

  4. Good one. Unfortunately even though I saved a lot of money, I spent them in remodelling my home/foreign tour and so my net worth has not gone up in the last 5 years. Time for a change.

  5. I did not understand this statement – Have I written a letter to all the insurance companies confirming the existence of my policy?

    Having policies with premiums paid on time is not enough?

  6. once in a while checking on whether the address is right, whether they have lapsed the policy, ….all are worth checking once in a while..

  7. Subraji, here’s a question:

    I invested Rs 1 lakh via monthly SIPs of Rs 4000 each in XYZ Mutual Fund (Equity: Large & Mid Cap) starting from Jan 2010 upto Jan 2012. (This was my first SIP investment at the age of 27 years. I’d started reading your blog some 3 months prior to that, which was how I got introduced to MFs.) At the time of starting the SIP, XYZ was rated 5 star by Value Research Online, for the past few years prior to 2010, which is one of the reasons I picked this fund. Then I stopped the SIP in Jan 2012 because the fund rating went consistently down (3 star) for a year. However, I didn’t redeem the existing units then. I was hoping for a turnaround. Oct 2012 onwards, the fund rating fell further down to 2 star. So, I decided to pull out of this fund and redeemed all units a couple of weeks ago, aka last week of April 2013. (The Rs 1 lakh had grown to Rs 100700.) Considering inflation and opportunity cost, its a definite loss here (as other funds have delivered much better returns).

    Now my dilemma is, how do I go about reinvesting this amount in another mutual fund. My objective is long term investment for retirement planning aka 20 to 30 years.

    1. Do I invest this amount in one go (lumpsum investment) in another ABC MF (Equity: Large & Mid Cap) that has been rated 5 start (for the last 5 years or so)? Or
    2. Do I once again do a SIP and invest this amount over the next one year, in the above mentioned ABC MF?
    3. Did I make a mistake by pulling my money out?
    4. Any rookie / starter mistakes I made with my first ever MF SIP investment?
    5. Typically how long should you wait before you pull your money out of a badly performing MF?
    6. Have I missed anything obvious?
    7. Any other points you may want to touch upon.

    My apologies upfront for posting this rather long and detailed question – googling didn’t yield any results. Most sites say when to redeem (aka fund manager changes, too many bad calls, fund objective changes) and how to redeem (aka what form to fill, how many units), but not how to redeploy the money you have redeemed (which is what I want to know).

    1. I’ve no hesitation in naming XYZ abd ABC, but was not sure if it would be advisable to do that in your blog.
    2. Another thing to note is that I also have 2 other SIPs running for Rs 4000 each, in MFs (Equity: Large & Mid Cap and Equity: Large Cap) belonging to 2 different Fund Houses. As of today, the rating of these 2 MFs has consistently been in the 4 star and 5 star range over the last 3 years. The day to day value of my amount invested keeps fluctuating with the stock market, of course. (And ‘everybody and his uncle’ says the market has gone nowhere in the last 5 years.) The reason I haven’t thought of stopping these SIPs is that I’m happy to see the 5 star and 4 star rating of the correspoding MFs.
    3. I’m also not sure if I’ve provided all other details that may be required to arrive at a conclusion. Please let me know if more info is required. Yeah, at the end of the day I’m also probably as clueless as the guy next door!

  8. Dear Arun,

    better you ask this question in jagoinvestor forum

  9. @Siva, What is wrong in question posed by Arun? It is very pertinent question raised by him. All so called financial experts say the same thing – pull out money from losers and invest in winners. But none of them tell how it should be done. The withdrawn money should be invested lumpsum or sip, is the biggest doubt lot of investors are having.

  10. a person selling mutual funds could be far more interested in answering switiching questions. I would stick to a good fund manager through thick and thin. So for me this is a hypothetical question, and hence not attempting an answer. I invest only in 3 fund houses, and am happy with my choice and not choosing schemes out of these 3 houses

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