Long Drive & Long Term Investing | Part II

Although you’ve done your preparations a day before, don’t write-off another ‘Amygdala Hijack’. Why again? Because earlier, it was just a plan. But now, it is about execution. You have a long journey ahead. A tiny voice in your head could make you a little nervous. Now, just breathe!

Part II - The Drive

1. Just Start

Be confident about your preparations. Just start the journey. All you need to do is get into the car and drive. On the highway, you will start breaking down the journey into small milestones. Few kilometres or few hours at a time. Breaking down a long journey into several small journeys is comforting, isn’t it?

You know what we call that in personal finance? We call it a Systematic Investment Plan aka SIP. The amount of your long-term financial goal can be huge. It could be in crores. It ‘will’ scare you. But, a SIP breaks it down into several monthly goals. Small monthly goals that make sense to you. Sounds comforting again, isn’t it?

2. Fuel

The checklist ensured we start with enough fuel (say full tank). Does that mean we won’t need it again? It’s a long journey and we may need to refuel.

In the long run, circumstances change. Your long-term investment plan needs to accommodate such changes. You may need to refuel (increase) your SIP and Insurance cover depending on the circumstances.

3. Timelines

Since truck drivers start driving around 6 AM, I prefer to start around 4 AM. The first two hours, I drive peacefully on a relatively less busy highway. What happens if I start my drive between 8-10 AM? Yes, people drive to work during those hours. The highways are busy then. As a result, I reach my destination late. Have you experienced something similar?

This is the most important lesson in Personal Finance. It’s called the Power of Compounding. Here’s the formula. Try calculating future value of these three investments:

Did you see the significant difference in (1) and (3) or (2) and (3)? Our minds are capable of making arithmetic (additions) calculations only. But investing works on the power of compounding, which is based on exponential (raise to power) calculations. So, which is the most powerful variable in the formula above? The answer is Investment Tenure (n). To create wealth, start investing early.

4. Progress

Let’s say you know the directions to your destination. But you might still use a GPS. Why so? You don’t want to drive those extra miles due to just one wrong turn. GPS assists you to stay on course, track the distance and keep a check on time.

Do you have a financial goal tracker in place? That works like a GPS for your personal finances. Create one to stay on course, to track the progress (of your financial goals) and make disciplined and timely investments.

But there is one significant difference between the GPS and the financial goal tracker. We will look at that in Part III – Aftermath.

5. Stay Calm

Imagine you approach a toll booth before entering into a city. What do you expect there? That’s right – traffic. Traffic can irritate you. But do you lose your cool?

We all know markets are volatile. But patience helps.

6. Destination

I am sure you’re thrilled to reach your destination without any obstacles on the way. Isn’t it the best feeling?

Have you experienced the joy of reaching a financial goal? Do you have your financial goals defined? You’ll obviously need to define your financial goals for the goal tracker as well. 

Let me share some examples. Think about having sufficient funds to get your children married or sending your child abroad for further studies. Or buy a house without huge loans. Yes, these goals can be quantified.

We’ve seen the similarities between a long drive and long-term investing in the first two parts. We’ll look at some differences in Part III – Aftermath. I save the best for the last! Here's the link.

Kind regards,

Milind Kohmaria

Seeker, Trainer, Entrepreneur

Milind Kohmaria is a Corporate Trainer & Consultant. He is a Certified Financial Planner & Chartered Wealth Manager with over a decade of experience in Accounts & Finance. He has delivered 79 Trainings & Workshops to 2,726 Participants over 853 Hours.

Below is a gist of his motives.

1.    Help Seekers Live Fulfilling Life by implementing Work-Life Matrix

2.    Make your files & data communicate professionally by using Everyday Tools

3.    Make Investors’ money work hard for them with Personal Finance Workshops

Milind is a member of Financial Planners Study Circle Group, Mumbai. He is an empanelled trainer with Education Institutes like BSE Institute Ltd,CIEL, Omlet Global School, etc. He is also invited by B Schools as a Guest Faculty to conduct sessions on Financial Planning & Wealth Management.