This is what is holding you back from reaching your long-term financial goals


If you always try your best
Then you’ll never have to wonder,

About what you could have done
If you’d summoned all your thunder,

And if your best was not as good
As you hoped it would be,
You still could say
“I gave today all that I had in me”.

~ Barbara Vance
Excerpt from the poetry collection “Suzie Bitner Was Afraid of the Drain”

“Wait, hold on a second, how is this relevant to personal finance?” 

Our client enquired, staring in confusion at the above poem which was glued to our boardroom glass window. After all, the poem stresses the need to strive for the best and having the right attitude and says nothing about making money.

Well, our philosophy at dezerv. is that personal finance is more about behaviour and attitude than knowledge.

We believe that to succeed at anything there are three essential elements :

1. Setting time-based goals and working backwards to identify the necessary actions at each point on the road.

2. Not deviating from our path by listening to the rational voices in our heads rather than the devil sitting on our shoulders.

3. Seeking advice from informed individuals and making mid-course corrections depending on our progress.

Let’s talk about the devil on your shoulder, who should be shunned off. After all, listening to the devil will only derail us from your path to financial success.

The procrastinator: 

“You’ve not started investing yet, nothing will change if you start next month, or better next year. Enjoy today and make the most of it!” 

Hey! shake that devil and warn it never to come back! 

Starting early, even with the smallest of steps, is the best way forward. In the personal finance context, the benefits of compounding depend on when you start and how much you start with. 

For example, let’s assume Sandeep and Sahil are two close friends and of the same age. They both like sports cars and decide that when they retire, they will race each other daily at the Buddh International Circuit. For this, they both start a Rs 5,000 monthly SIP (in the same instruments) and plan on continuing this till they are 60. The only difference being, Sandeep starts investing when he is 25 years old while Sahil starts at 30.

Any guesses on who smoked the other person daily on the circuit for the next 20 years?!

You’re right! It was Sandeep. Sandeep went ahead and bought himself a 2981 CC Porsche 911 while Sahil could only afford a 1900 CC Jaguar.

Final wealth accumulated (assuming both got an average return of 9% each year &reinvested all returns):

Sandeep- Rs 1.35 Cr

Sahil- Rs 0.85 Cr

Lesson: Start early, and if needed, start small. But start immediately or else you’ll be one smelling burnt rubber for the rest of your life.

The smart cookie: 

“Did you see that! Did you see what you did there?! Man, you are goddamn smart!” 

If we work on any task and it pans out, we take credit for it. If we invest in a stock that shot up by 45% in one quarter, we believe we have acquired a knack for investing. We internalise our victories and attribute them to something we did. This is not always the right approach for your long-term financial health. 

Well yes, if you do your fundamental research and select the right instruments for investments and in turn get higher returns, you can attribute part of the success to yourself. But, we should always acknowledge externalities that play a role in the grand scheme of things. 

Maybe large institutional investors loaded up on that stock you had invested, maybe the government created preferable policies for a specific sector or, heck, maybe, thunderstruck a large manufacturing plant of the competing stock! There can be multiple factors that could have played a role in the profits you earned on your investment, but we need to be wary of attributing all the success to our actions and internalising the victory. 

Lesson: We should not create a narrative that optimises our feeling of self-worth and intelligence. This is the most comfortable mindset, but, breeds overconfidence at one end and ignorance at the other.

The blamer: 

“I kinda always knew that this might come up. He/she/it royally screwed up and I am now bearing the brunt of it” 

On the other end of the spectrum is the blamer, who attributes everything to externalities. If something doesn’t work out, our default mechanism, at times, is to look for outside reasons as to why things went wrong. 

Think about the last time you delayed a multi-functional project deliverable at your company or the last time you and your close friend argued. Did you first think of all the reasons other than yourself which caused it? If not, “Great!”, but 99% of us are not like that.

We all have an instinct to build up walls and protect ourselves when we feel threatened.

We’re not saying that it's always your fault when things go amiss, but we need to take ownership when things go wrong.

Lesson: In investing, almost nothing is certain and everything is based on odds. Because of this, we certainly will, at times, make good decisions that won’t work, bad decisions that will work beautifully, and random decisions that, well… could go either way!

We need to acknowledge that investing is a journey, and, on this journey, we need to diligently do things that we can control and not be bothered about things that are not in our hands.

Author: Team dezerv.

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