As someone who left the support of family behind several years ago, the thought of ‘risk’ reminds me of Rajinikanth in Sivaji, just before the interval. Paying off an education loan, living on an NGO salary, “I am not going to ‘risk’ whatever little I can save,” I told myself assuredly. For years, I hadn’t even considered mutual funds as an investment. Or shares. Or debentures. Or bonds. Or gold. Or property. Or any of the various other ways in which you can invest your money.
As long as I was on a salary, financial planning was an afterthought.
The HR sends threatening emails in December/January asking for proof of something you claimed when you joined the company. You frantically gather the documents and send it to them two days after the deadline. Then you pray to all HR gods that they’ll accommodate your tardiness.
My education loan took care of any tax planning I might have been expected to do. So, my life back then was simple: Do your work, get paid, spend money before the 30th, get paid again, rinse, repeat, scramble to submit documents for two days in a year.
Life as a freelancer
Now, you’ll imagine what hit me when I began freelancing five years ago. I had 30 days’ worth of money in my bank account and no guarantee of any more money coming in, ever. This was new, and unsettling.
The uncertainty of not receiving a guaranteed monthly salary made me a hoarder — something I still can’t shake off.
I kept all my money, however much it was, in my savings account. I lived in perpetual worry that money will stop flowing in and I’ll need to dig into my savings. I did the only thing I knew to alleviate this worry — work hard and earn more.
Yet, I was so insecure that I would watch it like a baby: Every day, I would log into my bank accounts to make sure the money was there. I would write down my bank balance in my notebook. I would also write down how much new money came in each day. I would write down how much money I had in each form — money for work coming up, money for work-in-progress, money for work completed, pending invoices. etc. I still do monthly reviews to take stock of money in each stage.
Understanding Cash Flow
I didn’t realize it at that time, but this habit was really the education I needed about cash flow. Seeing the bank statement every single day — contrary to what you’d believe — alleviated the paranoia of not having enough money, in case, work stops coming. I could see in black and white that even if I stopped making any money today, I could live comfortably for the next x months with the money I have.
“Treat!” leapt my heart. I held it by its ear and brought it back to ground before I began moving money in excess of Rs. AB into a flexible fixed deposit. While I realized that I had a little more money than I needed, I was still wary of not being able to reach for it when I need it. Even as I invested money in an FD, I wrote down the interest I’d earned, how much more than the savings account interest it would be and most of all — what is the penalty I would have to pay if I have to break it. Every month, I reminded myself of these amounts, writing down calculations by hand, in my book.
The biggest part of growing as a freelancer is being able to gauge if the work was ‘worth it’. This can be seen in two ways:
- Are you earning enough to take care of yourself? I was.
- Are you being paid adequately for the value you are generating for the customer? This is complex. This needs more business acumen.
If I created a brochure for a Rs. 50,00,000 house in Bangalore. And that is an important collateral in customers making the decision to buy the house, what is the value I have created? Is it commensurate with what I’m being paid?
Asking these questions led me to confidently negotiate higher rates for my work. Less than a year in, I was earning enough to have to pay taxes! “BMKJ” I said and began building myself up as this patriotic citizen who gives away a part of her earnings to the growth of the nation. “You don’t yet have to, you know?” My ICWA-failure-self whispered in my ear. There was something about ‘tax savings’ in that income tax paper I failed twice.
Did it say PF? I opened a PPF account. I took a small part of the fixed deposit pie and put it into the PPF’s mouth. The first step in my long-term financial planning had begun. I made great strides in getting myself an LIC policy. I finally graduated with a medical insurance — “in the least, I’ll get tax deductions.”
You’ll get far more out of a health insurance than just tax savings, trust me.
Let’s subject ourselves to some market risks
After having enough insurance policies to wallpaper my 1BHK house, I had grown bored with it. Let’s subject ourselves to some market risks, shall we? Meh! I gave myself my first mutual fund investment — the tax saving version. You don’t grow adventurous in two years. Once an FD girl, always an FD girl!
In retrospect, I am grateful that I had the opportunity to earn, save and learn from it. The extreme caution with which I took each step — some may call it disproportionate, some call it paranoid — makes me the entrepreneur I am today.
My marketing agency is bootstrapped, profitable and has a healthy cash flow. We are by no means frugal — we pay well, we take care of ourselves, and we indulge in reasonable ways. We also have finances to fuel our ambitious growth plans, in various short and medium-term investments to withdraw when needed.
I can’t make claims that I am a smart investor. The return on my investments thus far has not been something I’d write home about. In fact, the opposite is true. I am a cautious investor, who is staking returns for safety. But this worked for me.
In short, what I’m saying is, there is no one right investment for all at all times. The only way to know what’s right for you is to learn, educate yourself, plan and experiment.
But in the end, you do you!
Ranjani is the chief marketer and founder of emdash, a marketing and communications collective. While she’s not marketing, she writes for various publications about Tamil cinema. The views expressed are the author’s own.