scorecardresearch2022 in Review: 6 key learnings from this year to improve your finances

2022 in Review: 6 key learnings from this year to improve your finances in 2023

Updated: 28 Dec 2022, 04:39 PM IST

Let us check out personal finance lessons learnt in this year, so that we can make 2023 a very happy new year.

key learnings from this year to improve your finances in 2023

key learnings from this year to improve your finances in 2023

Human life remains full of uncertainties, where nothing is normal or boring. 2022 was no different with consecutive crisis events followed one after the other. Beginning from the Ukraine-Russia conflict, followed up by interest rate hikes and ending up with re-emergence of COVID in China, 2022 has not let us down in terms of giving near scare to our financial dreams or objectives.

Despite devastating blows one after the other, Indian markets have reached new life-time high in 2022, resulting in outperformance in many investment instruments such as equity, mutual funds, index instruments etc., because of such outperformance the investors who despite the devastating blows remained invested, have received their due share of benefits.

However those who panicked were left to rue their decisions and learning is the biggest gift to mankind, hence let us check out more such lessons learnt in 2022, so that we can make 2023 a very happy new year.

There is always light at the end of the tunnel: With Covid, war, lock-down, inflation and lay-offs keeping faith and staying invested had become nearly impossible. At the beginning of COVID and lockdown era everyone thought it was the end of the world, and as a result many investors panicked and liquidated their investments. But these investors were left to blame themselves, as the market reached new lifetime highs within 2 years of time.

Therefore when it comes to investment, panic and fear are its worst enemies and should be befriended for lifetime. No matter the event, mankind has always sailed past its demon successfully and it would not be wise to bet against it in future.

Hope for the best but prepare for the worst: With uncertainties at every moment, planning in advance is the only way forward. Living under assumptions, or life without planning can cost you a fortune. When the calamity occurs only then we know the true purpose of things like, emergency fund, medical insurance, term insurance etc., until Covid, ‘pandemic’ was just a word, but post Covid people gained the importance of a health insurance.

Therefore in any financial planning, you must always keep room for emergency funds and insurance as many of us choose to ignore them. So, in 2023, hope for good health for yourselves and your dependents but prepare for the worst by having emergency funds and insurance.

Interest rates are cyclical and not permanent: Unless you are free of liabilities, in 2022 this lesson had the hardest pinch amongst the lot. Be it the Russia-Ukraine war or recessionary trend in the US, the rate of interest rose exponentially in 2022, resulting in a higher interest rate and thereby reduction in purchasing power.

Therefore, at the beginning of 2022 when borrowers borrowed under the assumption that it is an ideal time to borrow, now they must be rethinking. Having said that, nothing is permanent, RBI alters the interest rates every now and then in order to keep the economy healthy, therefore interest might be peaking today but soon it will cool off and provide the much needed relief to the borrowers.

Stay calm and remain invested: Even the greatest astrologers cannot predict the right time to invest, as volatility is the king of the market. Therefore, investors who think can time their entry are nothing but fooling themselves and foregoing the magic of compounding.

The only right time to invest is now, as past and future are beyond your control. In addition to that staying invested is of utmost importance, as excitement in panic can ruin your ultimate objective. Humans are the most intelligent species, and hence their re-emergence from the worst should never be doubted.

Remain adaptable: In every financial planning, as and when we know the destination, route does not matter unless the destination becomes unapproachable. 2022 gave us glimpse of many calamities such as war, inflation, rising food prices etc., and at every mode we needed to change our spending habits, along with our savings structure.

For example, recession fear made us aware about the importance of emergency funds or Covid made us realise it is important to have health insurance. Thus adapting in accordance to the situation, makes us future ready, otherwise it may not only attract unnecessary liabilities but also jeopardise our financial objective.

Be uncomfortable in the short term to remain comfortable in the long term: Investing is like a cricket test match, where long innings are vital for winning. Wealth building is a long term process, therefore there is no need to be scared about small hiccups such as pandemic, war etc. Therefore, if going gets tough in the short term, be calm and remain invested as the future will most certainly be more brighter and comforting than today.

Every planning has some or other shortcomings in it, but the most important thing is to learn from the inevitable mistakes and adapt for a brighter future. Every year teaches us something, and 2022 is no different, so let us learn from our mistakes and make our wisdom count for a better tomorrow.

Viral Bhatt is the Founder of Money Mantra - a personal finance solutions firm

These are the key learnings from Raghuram Rajan's book
First Published: 28 Dec 2022, 04:39 PM IST