Invest your way out of that toxic job

Hello everyone. I don’t generally post on social media platforms, but today I felt the need to do so.

Work Stress – Today’s reality

It pained me to read about the unfortunate demise/suicides of employees working for some companies just a few days back. Imagine what level of stress they would be working under. Imagine what their near and dear ones would now be going through.

Work stress has gone to very high levels over the past 2 decades and is unlikely to reduce anytime soon – infact it will only increase, given the highly competitive nature of the corporate world where profits and deadlines take precedence over employees’ mental and physical wellbeing.

This is leading to burnouts, chronic stress, and in some cases, deaths and suicides.

What should be done?

Due to this it has become very important to focus on how to manage your career and more importantly how to manage your finances.

Today most employees are running on a treadmill – in a rat race – where once they start their careers they would take up a big home loan, car loan, etc and then they are literally slaves of the companies they work for. The EMI at the start of the next month has to be paid. This is the reason they have to put up with whatever their companies / bosses throw their way, work for inhuman number of hours, sacrifice health & family life.

While there is no easy way out of this, there are a few things that young employees should do. While you cannot control your company's culture or your boss, try to focus on your Circle of Control – which means doing the things that are completely in your control.

Coming back to the loans - I understand having a home is important, but please start small. I'm not getting into buy vs rent, but whatever you do, initially try and stay in a small 1 BHK or even a 1 RK (the first few yrs of your career you are most likely a bachelor and don’t need more than 1 RK). By doing this you will be able to save more and invest that money in good avenues.

Please ensure you invest atleast 30% of your salary. More the better. Some may say that it is not possible given that you have to pay EMIs/rent and other expenses. A good way to do this is to sit down and make a list of all your expenses and see which are necessary and which ones are possible to reduce. I’m sure you will be able to free up some part of your salary for investments by doing this.

And where do you invest?

I would suggest starting an SIP in some good mutual funds as soon as you start earning and make the SIP as big as possible (you can reduce it any time if you want, but start as big as you can).

I am no investment advisor – please do your own research and consult a financial advisor before taking any action – but these are certain (very easy) steps, which I myself have taken, that will most likely ensure that by the time you are in your mid 30s/early 40s, you will be in a good financial position – and that would mean having the freedom to quit a bad company/boss.

Out of your total investable SIP amount every month -

Put around 60% - 70% in equity, 20% - 30% in debt and 5 – 10% in Gold.

For Equity, 3 - 4 Mutual Fund schemes are more than enough – 1 could be a large cap fund, 1 balanced advantage fund, 1 mid-cap fund and 1 flexicap fund (you can decide on this alongwith your financial advisor).

For the debt portfolio, you can divide your investments among PPF and a good debt fund - one which has the highest safety rating because the purpose of debt funds is protection and preservation of capital – not returns.

You can check the complete portfolios of any Mutual fund on websites like Moneycontrol, etc.

For Gold you can go for Sovereign Gold Bonds that the Government launches from time to time (apart from the appreciation in the value of Gold you also get 2.5% interest per year). Or you can go for Gold ETF.

These are general guidelines. You can choose to change the asset allocation - but the important thing is to start investing and stay invested.

Please stay away from Futures & Options. It harms you financially as well as mentally in most cases.

Investing directly in stocks is not required. But if you want to do it, please stick to quality bluechips and do proper research before investing.

Every year as soon as you get your increment, increase your SIPs by atleast the same percentage as your increment (if not more). Also please invest as much as possible from your Variable pay/bonus that you receive – you can do a Top-up SIP with that in the same funds that you have.

When you change your job, increase the SIP amount by the same/higher percentage of hike you got.

Remember - Compounding and Time are the 2 things that will work magic with your portfolio. Do not disturb your portfolio unless absolutely necessary. That is the first rule of compounding.

It doesn’t matter if your funds managed to beat the market or not... If your portfolio grows even by low double digits CAGR over a long enough period, you should be in a comfortable place at a later stage. Also do not worry about short term market declines because markets never go up in a linear fashion. In fact it is a good idea to increase your investments when markets have corrected, since you will get better points of entry.

The longer the time period you take, the higher is the probability of the markets giving good returns. Check it out for yourself.

If you start investing in a disciplined manner in your early 20s and keep increasing the amount every year – within 10-15 years you will be really pleased seeing where you have reached – and then you realise that you have the option of leaving a toxic job – if you want to quit your job and start something on your own, you can do it because by that time your portfolio has grown to a level where it can sustain you for a few years through an SWP.

This freedom is the dividend that your investments will give you.

Insurance

Ofcourse before starting your investments, please get your Life and Medical insurance in place.

Please get a good Term insurance plan (minimum Rs. 1 crore) and a good Medical insurance plan (minimum Rs 10 lakhs) for you and all your family members. Both these will cost you very little and will give great peace of mind and financial security to you and your family in case of unfortunate events in life. It is also a great idea to add a top-up health plan to your existing Mediclaim cover. You can add a huge amount to your medical sum assured if you take this - and it costs next to nothing.

Your portfolio = Your Business

Remember, your portfolio is your OWN BUSINESS and you should treat it like that. Give it that much importance. Because a job is not yours forever. Your company may replace you, you may shift to better jobs in future – but what will stay with you is your PORTFOLIO of investments.

Do not think of yourself only as an employee. You will be the owner of a business as well.

So in your 20s, please shun the temptations of buying things you want but may not really need - settle for a lower priced phone, settle for a lower powered bike - and focus on investing as much as possible. I’m not saying live like a miser, but spend judiciously.

You will thank yourself when you are in your 30s and 40s and beyond.

Now if you are already in your 30s or even 40s and haven’t yet started doing all this, do not fret. It is never too late to start. The good thing is your salary in your 30s/40s is much higher than what it was in your 20s, which means your SIP can be much bigger to start with. I myself had spent my 20s investing in ULIPs which hardly gave me any returns. I wasted a full decade, but then started my SIP journey in my early 30s and am thankful that I did.

Investing in Financial Education and Health

Another important thing is investing in your financial education – no matter how demanding your job is, make a habit of reading 1 business newspaper every day and at least 1 book on personal finance and investing every month. You will notice a sea change in your knowledge and perspective and you will be able to build your portfolio in a much more nuanced manner.

While this post is all about personal finance, I would also like to urge everyone to invest in their health – it is one of the most important things. Make it a habit to incorporate some form of moderate exercise, walking, etc. in your daily life. Make healthy eating choices. It is very easy to eat junk especially when you are in a sales job. Try to stay away from it as much as possible. Incorporate vegetables, fruits, cereals and pulses in your daily diet. What use is a good corpus if you are not in good health to enjoy it?

I know this has been a long post, but even if it helps improve one life, I would think it was worth it.

If you feel it will help others, do share it ahead. Thank you.