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Start Worrying about Your Personal Finances. Seriously!

Last Saturday, I was amongst a group of young architects (age-group of 25 to 35), lecturing on the art of managing one’s own personal finances, and the need to start saving and investing as early as possible.

At the end of it, I asked them, “So are you worried after listening to what I said?”

Some were surprised to hear this. “Worried? Why?” one of them asked.

“Indeed, I am very worried!” said another.

“Worried, and excited,” said the third.

“See,” I told the first person, “If you are not worried about what I just lectured for 3 hours, I think I failed in my arguments today.”

Visibly confused, he asked me,” But why do you say so? Why should I be fearful of what you’ve told us?”

“Simply because if you are not fearful now, you won’t act on whatever I just shared with you i.e., the need to start saving and investing as early as possible.”

Why you must worry about your finances?
Are you worried about your personal finances and how you are doing in your financial life?

If not, you should be!

In fact, no matter what generation (A, X, Y, or Z) you belong to, worrying about the state of your personal finances may be the most productive thing you can do to weather today’s uncertain economic times.

Of course, this threat-onomics approach may not sound right coming from a person (me) who has always maintained that you must not run after money, blah-blah-blah…but there is some sound science behind the benefits of embracing one’s concerns.

A research study done by a Yale University economics professor has revealed that financial angst – especially, the threat of losing money – is one of the most effective motivators for people to get on track in their financial lives.

In other words, some anxiety about whether you are heading in the right direction with respect to your personal finances can serve as a great motivator for you to try and get (or remain) on the right track to financial freedom.

Bring some angst into your financial life
It’s time you get some angst into your financial life. Start by asking yourself these six questions…

1. What would happen if [insert emergency] were to actually take place and I am not prepared financially to meet it?
Your fear would drive you to set up an emergency fund.

2. What if I don’t have enough money to fund my higher education 5 years down the line?
Your fear would drive you to start socking away money in a fixed or recurring deposit to fund your higher education.

3. What if something happens to me? Who will take care of my parents, wife, and children?
Your fear would drive you to buy term insurance to cover your family’s cash flows when you’re gone.

4. What if I lose my job? How will I repay my home loan?
Your fear would drive you to not take a big home loan than what your salary might warrant. And if you already have a big home loan, you will start saving extra cash to prepare for such an emergency.

5. What if my financial advisor takes me for a ride by advising me bad investments just to earn his commissions?
Your fear would drive you to be very careful while choosing a financial advisor (one who is trustworthy and intelligent).

6. What if the companies whose stocks I’m looking to buy turn bankrupt?
Your fear would drive you to take due care while buying stocks, and then buy stocks of only well-run businesses.

7. What if my investment returns are not able to beat the inflation over the next 20 years, when I would need money for my child’s marriage and my retirement?
Your fear would drive you to have a healthy mix of good quality stocks and equity mutual funds in your portfolio – investments that can help you beat inflation over the long term.

In short…
…cover all the scenarios that can keep you awake at night.

See, as you perform this fire drill, notice that you are trying to pinpoint specific vulnerabilities in your financial plan…so that you are prepared to take care of anything that can go wrong (and things will go wrong some or the other time in your financial life).

“A lot of success in life and business comes from knowing what you want to avoid: early death, a bad marriage, etc.” These words from Charlie Munger, the business partner of Warren Buffett, say a lot about how we must approach our lives.

What Munger means above is that, at most times, a ‘not-to-do’ list is more important than a ‘to-do’ list.

So, instead of focusing on becoming too smart with your personal finances, I urge you to focus on avoiding foolish behavior. And that can happen only when you are worried about your financial future.

Not worried about running after money, but worried if you have not started taking proper care of your financial future.

By the way, at the end of my Saturday lecture, someone definitely was worried about his financial future, as he noted down some of my recommended steps for new, young investors. You can ignore the mutual fund recommendations here. 🙂

Way to get over your financial fear (To-do list)
Now, after you bring some angst into your financial life, the idea must be to get over it.

The starting point to get over your financial angst is to write down the answers to the questions I suggested above.

The second and the most important step is to START work on the action points that your answers suggest.

Then, it’s all about spreading out the risk.

In portfolio-building terms, that means holding a mix of investments that don’t move in lockstep with one another (you may know it as ‘asset allocation’).

————The Art of Asset Allocation———–

Get my latest special e-book – “The Art of Asset Allocation” – absolutely free! Just take the Safal Niveshak Investor Survey


What I generally practice in my personal life, not one single investment (like one stock, or one mutual fund) comprises more than 10% of my overall portfolio. That gives me a lot of peace of mind.

Here is a sample allocation that you can have (from your monthly income) to take care of your current living standard and also provide for your future (and this is assuming that you are under 35 years of age, married, and have 1-2 kids):

  1. Not more than 30% of your net take home salary must go towards your home loan EMI (that is if you have or are thinking of taking a home loan).
  2. Another 20% of your salary can be allocated to your monthly household expenses (including kids’ education, insurance premium, etc.)
  3. Whatever you earn every month, try to save at least 40% of it.
  4. Create an emergency fund to cover 6-8 months of expenses – in case you lose your job or face any other emergency.
  5. Buy medical insurance (to protect against medical emergencies) as well as term insurance (to protect you family when you’re no more).
  6. Whatever money you need in the next 1 year (like for down payment of your home), keep it ultra-safe – cash under mattress or in your bank savings account, or in a liquid fund. Don’t keep such money in stocks. Never!
  7. Whatever money you need in the next 1-5 years, choose safe, income-producing investments such as fixed or recurring deposits, and bonds.
  8. Any money you don’t need within the next 5 years is a candidate for the stock market. As a rule, I keep 70% of such money that I don’t need in the next 5 years in stocks or equity funds.

With rules like these in place, it’s a lot easier to stomach any kind of uncertainty that you may fear for your finances.

So I say: Go ahead, embrace your angst…and then act to reduce this angst.

And remember, no matter what I or anyone else might blare, your investments or asset allocation are entirely your personal choices. Take care of these, and you will do a big favour for yourself in getting over your financial worries.

But first, start worrying about your personal finances. Seriously!

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About the Author

Vishal Khandelwal is the founder of Safal Niveshak. He works with small investors to help them become smart and independent in their stock market investing decisions. He is a SEBI registered Research Analyst. Connect with Vishal on Twitter.


  1. as i understand not all need to worry.. it is about a comfort of the kind of life we want to live… some just don’t want to live thinking of and worrying about another day… which should be fine… as long as they are making a considered and aware choice…

    • Well Vipin, as the core of my post suggests, the need to worry is for those who haven’t started working towards their financial future, or who have lost track of things they need to do (like create emergency fund, or starting to save and invest) to bring their financial life in order.

      The ‘worry’ here is more about the need to START taking care of your finances, than worrying about running a rat race for all the material comforts in life.


  1. […] wrote a post in May on why you must start worrying about your finances. My reasoning was that – and I had quoted a research done by a Yale University economics […]

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