How to develop the habit of SIP-

Investment is not at all a rocket science. For someone who wants to build a great portfolio, live a life of financial freedom and achieve her/his financial goals, SIPs are the most wonderful instruments. A humble SIP started early can create a huge portfolio figure a few years later. That’s how the magic of compounding works. Yet most of the people who want to start the SIPs don’t take action and their delay ultimately causes a substantially reduced portfolio sum.

But the problem is that most of us are blind to our own habits. When we say that we earn quite OK but don’t know where all the money goes leaving nothing to save, we are in a way admitting our lack of awareness.

For these investors, an approach called pointing and calling could be very useful to create that awareness and do the right thing i.e. committing for SIPs.

This is how this approach works-

Write down the income and major category of expenses on a sheet of paper. So you may write-

My income is Rs 1 Lakhs
I spend Rs 15 K on rent
I spend Rs 10 K on ration, vegetables and milk
I spend Rs 10 K on dining and entertainment
I spend 20 K on my car EMI and fuel
I spend Rs 10 K on shopping.
I spend Rs 15 K on various bill payments.
I don’t know where the remaining amount goes.

Then you may write-
I am committed to saving because financial freedom is utmost important for me. I value my freedom at any cost so come what may, I must save at least 20% every month.
I can not wait till the end of the month for saving because somehow money slips, therefore I am committing to save first and adjust my expenses with the remaining amount.

Saying it out loud will inculcate the habit of saving. When you do this pointing and calling, you create awareness towards that habit. Also, since you have added the element of your values, you will most likely try your best to do it and soon enough you will develop this healthy habit of saving regularly.

Manoj Pandey
CFP