If you are anything like us, by now you would be tired of reading those preachy articles with headlines like '22 money resolutions for 2022', '10 personal finance resolutions you can keep' or 'Financial resolutions for a healthy 2022'. Like those in the business of making Sensex and Nifty annual predictions, there are many who, year after year, keep repeating the same old personal finance stuff each time the calendar year dawns to an end. Let's face it: Telling people to cut expenses, boost income, invest in mutual funds and lower debt is no rocket science. New India and investors require actionable insights. Here are five practical money lessons for 2022 and beyond.

1 FOMO is not a reason to invest

Fear of Missing Out a.k.a FOMO is a strong trigger for many to ultimately invest in high-risk bets. With the advent of cryptos, NFTs and international forex derivatives, access is no longer a problem. But freedom to invest and make money can also mean scope to lose money. Often, investors suffer from the remorse of not investing in something. For example, those who bought Bitcoin in January 2021 would be sitting on 60% YTD gains. Gains are upwards of 400% for those who opted for Ethereum and 1200%+ for those betting on Binance Coin. Those who didn’t will suffer from FOMO. Dizzying returns can force you to change your perspective.

And, before you know, you will be thinking of taking a big crypto bet. If you are experiencing such symptoms, take a moment and step back. Evaluate why you did not invest in those assets in the first place and get a status check on whether the same reasons exist today. As far as cryptos are concerned, cryptos were unregulated an year ago and still remain unregulated. There is already talk of a ban on cryptos and all eyes are on a government bill that is aimed to alter the crypto landscape. Net net, if your reason to not invest in cryptos was due to lack of proper legal recognition, don't jump head first now. Each investment opportunity comes with pros and cons, and it will be foolhardy to bet money seeing historical returns. If you still want to try out cryptos, invest a sum that will not cause a heart-burn if you loss all. The flipside to this is that even if you make 4-5 fold return, your net worth won’t be impacted much!

2 Stress, thy name is day-trading

Once you step into the ring of pure speculative investments such cryptos, day-trading in stocks may be another temptation for you. You could even argue stocks are a lot less volatile than cryptos. With stock markets having more than doubled in 5 years, many new retail investors have entered the markets. Demat account holders have more than doubled in 3 years to 7.38 crore. A big share of newbie demat account holders are young people, in their 20s, who have seen a bull market for the first time. When IPOs pop and listed shares rise 10-20% per session regularly, many believe that making daily profits in stocks is easy. The desire becomes greater with so-called gurus sharing daily P/L screenshots on social media. But be in intra-day stock trading or dabbling in futures & options, you have to prepare for a lot of stress if you decide to go for it in 2022.

The smartest thing would be to avoid day-trading altogether, but greenhorn investors wouldn’t want to listen. Success in intra-day trading requires 3 things: targetting the right trade, the right entry and the right exit. Unfortunately, these 3 things don't happen in the order you want them. Hence, stress levels rise day in and day out. Intra-day trades are trickier because often the price reaches your desired level for a wee second; this means you can’t even go to the loo without keeping the trading app open on your smartphone! Many people take low-cost paid advisory services, but an advice is as good as its execution. And with many inexperienced traders themselves overnight turning 'trainers', you can’t hitch a ride on their backs. Only a small percentage of people are able to consistently make it as successful intra-day traders. The rest lose their capital and eventually exit. So, keep an eye on your blood pressure if you join the ranks of day-traders.

3 Hire a registered investment advisor

Every year brings with itself new intricacies. There will be new risks as well as opportunities. But not every movement in the markets needs to be accompanied by some action at your investment portfolio level. Just because you loved a video criticising actively managed funds doesn’t mean you do that for your portfolio unless you are an expert DIY investor.

If you are an average joe with low to moderate levels of financial literacy, don't do anything to your portfolio without consulting your investment advisor. If you don't have an advisor, 2022 may be the year when you actually hire the services of one. To be clear, your friend, neighbour or wise colleague is not the advisor we are talking about here. Go for a SEBI-registered investment advisor who will charge a fee for their work, just like other professionals such as doctors, lawyers and CAs. Money advice is deeply personal and has to be highly customized. What works for you, may not work for me. So, be wary of any robo advisor who generates template-based advice.

4 Don’t unknowingly take on more debt

Cheap loans and leverage appear like free money. But, they are not. In India, credit growth has improved to 7.3% (Dec 3, 2021) from 5.5% in FY21 mainly due to an acceleration in retail, with mortgages and other retail loans. These contribute 64% of incremental credit. Credit card growth is re-accelerating, driven by the festive season, easing asset quality stress. Clearly, people are ready to take loans in a big way once again. But, that doesn’t mean you have to join the club. Loans taken simply for consumption, instead of building an asset, are just a poor excuse of not saving. Many new borrowers argue taking loans can improve their credit score. Yes, they can. But loans are tomorrow’s savings borrowed today.

You can unknowingly end up taking debt today., Earlier, there were just irritating phone calls enquiring about your need to take personal loan. Today, flush with cash, lenders have devised new ways to sell loans. Concepts such as Buy Now Pay Later (BNPL) that prompt you take them during checkout stage at e-commerce platforms, and digital loans availabe with 3 clicks, have made it very easy to get funds. Lenders want to you as a borrower to take loans for every possible expense such travel, healthcare etc. There are platforms that are allowing you to pay rent via credit card! But, they are still debt and need to be repaid.

The new forms of loans are trying to fundamentally change habits in ways you dont’ understand. By encouraging you to buy things this instant irrespective of whether you can afford them or not, lenders are trying to instantaneously gratify your needs. When you practice this for a few times, you will no longer have the patience to save and buy goods. You may argue the the BNPL ticket size is smaller, but that is only because lenders currently want to cap their lending risk. When they are ready, they will boost the loan sizes to whet your higher credit appetite. Ditto for digital loans. Though the RBI is putting in rules to control the digital lending space, you as a borrower have to be extremely prudent when you use these facilities.

5 Add nominees, make a Will

People discuss many things with their family, but financial details are always a less-communicated area. Covid-19 has shown how sudden demise of many has left their families completely in the dark about finances. If you are also in the same club, change this way of doing things in 2022.

Over ₹80,000 crore lying in unclaimed bank acounts, life insurance, mutual funds and PF. One of the reasons is that claimants may not have been told. To avoid this, spell out all the details about your bank accounts, insurance, investments and so on to your spouse. Write the details and keep them in a physical file marked 'my investments'. Merely sending an email or excel sheet may not work today when a tsunami of emails come daily. Specifically tell the recipients to save those details.

Pleas ensure that all financial assets have a nominee. Add nominee (preferably someone younger) to your bank accounts, deposits, mutual funds, provident fund etc. It is a one-time hassle, but having a nominee is a great step. A nominee is a person who can receive the proceeds of your account in case of your unexpected death. The nominee can be anyone you want i.e. parents, spouse, kids, siblings. When you nominate, you make it easy for dependants to have access to investments.

A nominee is only a custodian of your assets, and not the legal heir. If you want complete peace of mind, make a registered Will to be doubly sure that the investments reach the right person in your absence..

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