Finshots Money Milestones #1_ Taste of Freedom

This is a Deep Dive discussing practical personal finance topics. The main ideas include the concept of "loud budgeting" which involves publicly announcing savings goals to friends to hold oneself accountable, the importance of establishing a rainy day fund and an FU fund (financial security fund) to have the freedom to walk away from a job, different options for investing such as fixed deposits, recurring deposits, and liquid funds, the benefits of starting retirement planning early and the power of compounding, and the importance of having insurance for unexpected expenses. Hey everyone and welcome back for another Deep Dive with us. You know how much we love to dig into those really practical personal finance topics? Well, this time we're looking at how to nail your finances right from the very first paycheck you get. And the inspiration for this Deep Dive is FinShots Money Milestones, hashtag one. Ah, yes, Taste of Freedom, which is a very fitting title, I think, because it's really all about getting that solid financial foundation early on and, you know, avoiding all those money mistakes that we tend to make early in our careers. Yeah, and I love how FinShots just jumps right into it with this idea of loud budgeting. But I have to admit, the first time I heard that phrase, I was like, wait, am I supposed to like be shouting my expenses from the rooftops? Yeah, it sounds a little counterintuitive. Yeah. But it's actually a really clever approach when you think about it. Okay. I'm intrigued. Tell me more. Well, how often have you felt pressured to spend money you didn't really want to just to kind of keep up with your friends? Oh, gosh. All the time. You know, it's like this unspoken social pressure to go out or buy the latest gadgets or, you know, whatever it is that's trending. Yeah. Or like to go to that concert that you don't really want to go to, but everyone else is going. Exactly. Yeah. So loud budgeting kind of flips that script. Oh. It's about publicly entrancing your savings goals to your friends and actually turning that peer pressure into a positive force. I love that. It's like instead of my friends pushing me to blow my paycheck on like a weekend getaway, they're actually like holding me accountable to saving for that awesome coding course I've been wanting to take. Precisely. Yeah. And think about the ripple effect, too. You know, your friends might see you actually hitting those goals and they think, hey, if they can do it, maybe I can, too. Right. It's like this positive chain reaction. It's kind of like that pay it forward mentality, but with personal finance. I like that. And I love that the article even gives this great example, choosing to skip a big trip to GOA. Oh, yeah. To save for a new phone instead. Right. Prioritizing. Right. It's about like what truly matters to you, not necessarily depriving yourself, but making a choice. Yeah. Conscious choices. Align with your values and your goals. Yes. Love that. Now, I do have to ask about this. Yeah. Because FinShots provides this spreadsheet to help you track your spending. And, you know, sometimes spreadsheets can be a little bit intimidating. I hear you. But, you know, the key is to just find a system that really works for you, whether it's an app, a notebook or, yes, even a good old fashioned spreadsheet. The important thing is to get a clear picture of where your money is actually going. Yeah. It's like shining a light on those sneaky spending habits that we all have. That can really sabotage even our best intentions. Exactly. And once you see it all laid out in front of you, it's so much easier to kind of make adjustments and start building those better habits. All right. So, loud budgeting. That helps us kind of keep our spending in check. But what about when we think about those bigger financial goals, like, you know, feeling secure enough to actually make some bold choices in life? And that's where I think FinShots' idea of buying freedom comes in. I love this concept. It's so powerful. It is. And it's about establishing these two key funds, a rainy day fund and what they call, a bit bluntly, the FU fund. Yes. That got my attention for sure. Yeah. So, the rainy day fund, I get that. Rainy days, unexpected expenses. You're right. Exactly. Emergencies, that kind of thing. Car repairs, sudden medical bills. Yeah. Okay. You know, helping a family member in a pinch. It's about having that cushion for life's little curve ball. Okay. That totally makes sense. But the FU fund, I'm intrigued, but I'm also maybe a little scared to ask. Don't be scared. It's a very powerful concept. Even if the name is a bit, shall we say, direct, but the FU fund is really about having enough financial security that you can walk away from a job. That is just making you miserable. Whoa. Okay. So, it's like having that freedom to say FU to a toxic boss or a dead end job. Right. Exactly. Having options. It could be to pursue a different career path, to start your own business, even take a break to travel the world. It's about being in control of your destiny. I can already feel this dress melting away just thinking about that. But how much are we talking about here? Like a couple months worth of expenses? A year's worth? Yeah. So, FinShots recommends aiming for three months of expenses in a readily accessible savings account. That's your first line of defense, so to speak. Okay. Three months. I can wrap my head around that. But what about the rest of that FU money? Where does that go? Well, they suggest exploring options like fixed deposits, recurring deposits, or liquid funds. Okay. Hold on. Each has its own kind of pros and cons in terms of liquidity and potential returns. Yeah. For those of us who aren't finance wizards, can you break down those terms a little bit? Sure. So, fixed deposits or FDs are kind of like putting your money in a time capsule. You lock it in for a fixed period at a predetermined interest rate. They're generally considered low risk, but you do sacrifice some flexibility there. Gotcha. So, it's like a savings account, but you're making a longer commitment. Exactly. Okay. What about recurring deposits? So, recurring deposits or RDs are similar to FDs, but instead of depositing a lump sum, you're making regular contributions over time. So, think of it like a disciplined savings plan. Oh. So, it's like setting up an automatic transfer to squirrel away a bit of each paycheck. I like that. Yeah. And then what about liquid funds? So, liquid funds are a type of mutual fund that invests in short-term debt instruments. They offer a little more flexibility than FDs and potentially higher returns, but they also come with slightly higher risk. Okay. So, liquid funds are like the middle ground between a savings account and FDs. You got it. More flexibility, a little bit more risk. Exactly. And remember, the key is to really choose options that align with your risk tolerance and your financial goals. Right. One size does not fit all when it comes to personal finance. Absolutely. And speaking of long-term goals, let's shift gears to a topic that I think many people put off. But FinShots makes a very compelling case for starting early. Retirement planning. Retirement planning. Ah, that just feels like a lifetime away. Yeah. You know, I'm still trying to make rent this month. I hear you. But trust me, the sooner you start, the better off you'll be. It's all about the magic of compounding. You know, the earlier you invest, even small amounts, the more time your money has to grow exponentially. Okay. Compounding. That sounds suspiciously like math. It is a little bit of math, but imagine like a snowball rolling down a hill. As it rolls, it picks up more snow and gets bigger and bigger. Compounding is like that. Your initial investment earns interest, then that interest earns interest, and so on and so on. And over time, it creates the snowball effect. And it just accelerates your returns. Okay. I'm starting to see the light here, but it still feels a little abstract. Do you have like a real-life example, like with actual humans? Of course. So FinShots tells the story of Anjali and Rahul. They both start their careers with the same salary. Anjali, the savvy one, starts investing 10% of her income at age 21. Rahul, well, he's enjoying his avocado toast a little bit too much and waits until he's 30 to start. Uh-oh. I have a feeling this isn't going to end well for Rahul. You're right. By the time they reach retirement, Anjali has a significantly larger nest egg, even though she invested less overall. The difference is staggering. Okay. Wow. That is a serious wake-up call. I am now convinced I need to get on board with this retirement planning thing, but where do I even start? Well, FinShots suggests starting with at least 10% of your salary. And looking into index mutual funds is a good option for beginners. Index mutual funds. Yeah. Have you heard of those? Yeah. They sound familiar, but I'm not exactly sure what they are. They're basically like baskets of stocks that track a particular market index, like the nifty 50. So it's a way to diversify your investments without having to pick individual stocks, which can be time-consuming and risky, especially when you're just starting out. So instead of trying to be like a stock-picking guru, I can just invest in an index fund and let the market kind of do its thing. Exactly. It's a low-fuss way to get started and benefit from long-term market growth. Okay. I'm feeling way less intimidated about this whole retirement planning thing now, but there's one more thing FinShots talks about, and I'm not going to lie, it kind of rolled my eyes when I first read it. Insurance. I mean, I'm young and healthy. Do I really need that? You might be surprised. Even if you're young and healthy, unexpected things happen. And the cost of healthcare especially can be astronomical these days. Okay. Point taken. But my job offers health insurance. Isn't that enough? Not necessarily. You know, job situations can change. You might switch jobs, start your own business, even take a career break. You don't want to be left without coverage if something unexpected happens. Okay. That's true. I hadn't really thought about it that way. So you have your own safety net no matter what happens. Exactly. But what about life insurance? Isn't that just for people with families? It's certainly important for those with dependents, but even if you're single, you might have other financial obligations, like student loans, or maybe you help support your parents. Life insurance can provide a financial safety net for them if something were to happen to you. Hmm. You've given me a lot to think about. Good. And the fact that insurance is cheaper when you're young and healthy is a pretty compelling argument. So where can I go to get some good advice on all this insurance stuff? Well, FinShots actually has a sister company called Ditto Insurance. They specialize in helping people understand their insurance needs and find the right policies. Oh, that's really helpful. I will definitely look into that. Hmm. They cover budgeting, emergency funds, retirement planning, and even insurance. That's a lot to process, but I'm already feeling more on top of things than I was before. That's great to hear. It's a journey, not a destination. Yeah. Taking those first steps is the most important thing. Absolutely. So what about you? What's standing out to you as the biggest takeaway from this first part of our deep dive? I think the idea of reframing peer pressure with loud budgeting is brilliant. You know, it taps into something very real in our social lives and turns it into a force for good. And the emphasis on starting early, whether it's retirement planning or even just getting those insurance policies in place, that's a real game changer. Yeah, I totally agree. It's all about making those early choices work for you instead of against you. And you know what? It really does feel like we're starting to get a taste of that freedom that Finchoff keeps talking about. Exactly. And there's more to come. In the next part of our deep dive, we'll be tackling the age-old dilemma of renting versus buying a home. So stay tuned. Speaking of freedom, I think it's a perfect segue into talking about where we want to live. So are we renting that cool apartment downtown, or are we going to take the plunge into home ownership? That's an age-old question. Exactly. And that's what Finchoff dives into with their money milestone, hashtag two, rent or buy your castle. You know, I've actually been kind of wrestling with this myself lately. It just feels like everyone has an opinion, but there's no easy answer. There's definitely no one-size-fits-all. And Finchoff acknowledges that right from the start. You know, they say there's no universally right answer. It all comes down to your individual circumstances and goals. But they do offer some really insightful frameworks to help you navigate this decision. Yeah. One thing they highlight that really resonated with me was the hitting cost of home ownership. It's so easy to get caught up in the excitement of owning a place, but kind of forget about all those extra expenses. Yeah. It's so much more than just the mortgage payments. You've got property taxes, insurance, maintenance. Oh, and don't forget those surprise plumbing emergencies in the middle of the night. Exactly. It all adds up. Yeah. And Finchoff points out something I hadn't fully considered. The opportunity cost of that big down payment, I mean, that's a chunk of money that could be invested elsewhere, potentially growing faster than your home's value. It's all about the trade-off. Right. The stability and potential appreciation of owning a home versus the flexibility and the potential investment returns of renting. So Finchoff actually introduced this concept called the price-to-rent ratio to kind of help weigh those options. Okay. Break that down for me. Price-to-rent ratio. That sounds a little technical. No, it's actually pretty straightforward. It compares the cost of buying a home to the cost of renting a similar property in the same area. Yeah. So a high ratio might suggest that renting is more financially favorable. Ah, I see. So if the ratio is low, buying might be the better deal, but a high ratio means maybe renting makes more sense. Exactly. But it's just one data point to consider. Right. Remember, it's not the whole picture. Yeah. It's the market trends, your own financial situation, even your personal preferences play a huge role. Because, I mean, owning a home, it's not just about the numbers. No. Absolutely not. It's about that feeling of putting down roots. Yeah. Having a place that's truly yours that you can personalize. It can be a powerful emotional driver. For some people, that sense of stability and pride and ownership can be priceless. And then for others, the flexibility of renting might be more appealing, being able to move more easily for a new job or just for a change of scenery. And let's be real, you're not the one who has to fix that leaky faucet at two in the morning. True. Very true. So I think FinShots really emphasizes aligning your housing decision with your life stage and goals. Like a young professional who's constantly on the move, they might prioritize renting. Whereas a growing family might really crave that space and stability of a house. It's about matching your housing choice to your current needs and kind of anticipating those future changes. Yeah. Do you see yourself kind of staying put or exploring new horizons? Now, they do have some super practical tips for aspiring homeowners, like building a strong credit score, diligently saving for that down payment, getting pre-approved for a mortgage. All crucial steps. For sure. Buying a home is a major financial commitment, so being prepared and informed is key. They even have this checklist for evaluating potential properties, like the location, amenities, proximity to schools or work, even like the overall vibe of the neighborhood. It's about finding a place that truly fits your lifestyle, not just ticking boxes on a spreadsheet. Right. This is where you're going to be spending a lot of time. Exactly. So what I really appreciate is how FinShots wraps up this whole milestone by reminding us that this renter buy dilemma is a deeply personal decision. It is. There's no right answer. Weigh the pros and cons, think about your priorities, and if you need help, seek expert advice. Very sound advice. For sure. Rushing into such a big decision without really thinking it through can lead to a lot of stress and even financial strain. Absolutely. Well, I'm definitely feeling more equipped to kind of tackle this decision now. What about you? What's resonated with you the most from what we've talked about so far? You know, I think what I really love is how FinShots connects financial decisions. With personal values and aspirations, it's not just about accumulating wealth, right? It's about using those resources to actually create a life that aligns with what matters to you. Yes. That is such an important point. It's not just about the numbers. It's about building a life that you love. And speaking of aligning finances with personal values, that brings us to our next topic, investing with a purpose. We're diving into FinShots money milestone, hashtag three, invest with heart. I love it. Are you ready to explore how to make our money work for us while also making a positive impact? Absolutely. Let's see how we can put our money where our heart is. All right. So let's talk about this whole investing with a purpose thing. It's something I've heard about but never really dug into. Luckily, FinShots money milestone, hashtag three, invest with heart, kind of lays it all out. Yes. It's definitely a growing trend. More and more people are realizing that their investments can actually reflect their values and contribute to positive change. Yes. Let's start by highlighting just how big this trend actually is. Get this, 79% of millennials are interested in sustainable investing. It seems like our generation wants our money to do more than just like sit in a bank account. It makes sense. You know, we're much more aware of these global challenges like climate change and social inequality and we want to be a part of the solution. Yes. And FinShots points out that it's not just about like avoiding investments in companies with questionable practices. It's about actively seeking out those companies that are making a positive impact, whether it's through renewable energy, ethical sourcing, or promoting diversity. Exactly. It's about aligning your portfolio with what you believe in. You know, putting your money behind companies that are working towards a better world. Really is about putting your money where your heart is, like they say. But I have to admit, there's part of me that wonders, does investing with a purpose mean sacrificing returns? Can I actually like do good and make my money grow at the same time? I think that's a common concern. But the good news is that sustainable investing is evolving rapidly and studies are actually showing that sustainable funds often perform on par with or even outperform traditional funds. Wait, really? So it's not a trade-off after all. I can actually make money and feel good about where it's invested. That's the idea. And it's not just wishful thinking. Companies that prioritize sustainability, they tend to be better managed, more innovative and better positioned for long-term growth. Okay. I'm actually intrigued. So how do I actually get started with this whole purpose-driven investing thing? Do I need to be like a financial expert? Not at all. Tenshot suggests starting by defining your values and impact goals, like what matters most to you? Environmental protection, social justice, supporting local businesses. Okay. So I need to figure out what causes I'm actually like passionate about. Exactly. Okay. Once I know that, then what? Then it's about researching and selecting funds or companies that are specifically focused on those areas. There are tons of resources available online, and even financial advisors who specialize in sustainable investing. So it's like doing your due diligence on the companies you're supporting, making sure they're actually walking the walk. Exactly. Transparency and accountability are essential. Look for companies with strong ESG ratings. That stands for environmental, social, and governance. It's basically a measure of their commitment to sustainability. ESG. Got it. Another acronym to Adaflis. But this is all making so much more sense now. I'm realizing that I can actually have a say in where my money goes and what kind of impact it has. Absolutely. And Tenshot even mentions another option, which is impact investing. This is where you directly invest in companies or projects with a very clear social or environmental mission. Oh, wow. So like investing in a company that's developing renewable energy solutions or supporting affordable housing initiatives. Exactly. So it's about intentionally using your capital to create positive change while still generating a financial return. I love that. It's like taking this whole idea of investing with a purpose to the next level. But is this something that's only for like super wealthy people? Not at all. There are options for investors of all levels. You know, there are mutual funds that focus on impact investing and there are platforms that make it much easier to invest directly in social enterprises. So no matter how much money I have, I can still make a difference. That's pretty empowering. It is. Every investment decision is a chance to support the kind of world you want to see. Well, that wraps up our deep dive into FinShot's money milestones. We've gone from, you know, managing that first paycheck to making choices that align with our values and actually contribute to a better world. It's been quite a journey. It really has. And I think the biggest takeaway for me is that sense of empowerment that comes from taking control of your finances and making those conscious, informed decisions. I couldn't agree more. You know, it's not just about building wealth. It's about building a life that reflects what truly matters to us. And we hope our listeners are walking away feeling inspired and ready to take action. I'm sure they are. You know, even small steps can make a big difference over time. Exactly. And remember, there are resources out there to help you along the way. FinShot offers tons of great information. And for those insurance questions, you can always check out their sister company, Ditto Insurance. You got it. To wrap up, I want to leave you with this. What's one small step you can take today to start building a stronger financial future that reflects your values and your dreams? It could be setting up a budget, researching a sustainable investment fund, or even just having a conversation with a financial advisor. Every journey begins with a single step. Thanks for joining us on this deep dive. And until next time, keep learning, keep exploring, and keep striving to create a life of financial well-being and purpose.