Intro: How can you better manage your income and savings in the current economic slowdown? How can you better pay off your EMIs or plan ahead for future ones? Why do we need financial education at school level, besides the conventional one? What all to look out for when you invest in markets and why? This week on Socio-economic Voices we have Finance Management Expert & Coach Chinmay Joshi answering these and many more such important questions. A very in-depth interaction with Senior Journalist Mahima Sharma where Indiastat brings you this unconventional interview to ensure that we serve you not just the analytical view of the socio-economic situation of the nation, the dissection of the Union-Budget 2023, but also other benefits to our readers in their day to day life. So learn - Why you must park only your ‘Sandwich Money’ in the Cryptos, if at all you do. Read more to stay ahead in your financial plans of life, only with Indiastat!

MS: As a financial management expert, what are your thoughts on the 2023-24 Union Budget, including the unseen benefits and drawbacks, and how can the drawbacks be addressed effectively?

CJ: According to me, the budget is well planned. Despite adverse geopolitical situations, the budget is focused on long term growth.

The current budget will bring out quite many benefits for the youth. Let me share some important ones for their understanding via Indiastat.

• Agriculture Accelerator Fund - This will help young entrepreneurs in rural areas to bring revolution in agri tech startups
• Ease of doing business - India is gradually getting better to help ease the process of doing business. 39000 compliances are reduced and 3400 legal provisions which had criminal implications are decriminalised. Also 42 amendments have been done in Jan Vishwas Bill to reduce the compliance burden on business owners.
• National Apprenticeship Promotion Scheme - 47 lakh youths will be benefited under this program which will help them to be job ready and will also help the industry to grow.
• Threshold limits increased for business from 2 crore to 3 crore and for professionals from 50 Lakh to 75 Lakh with 1 condition that 95% of your receipts are online non cash transactions.
• The duration of the benefit of carrying forward losses on the change of shareholding of startups has been increased from seven years, as it currently stands, to ten years from the date of incorporation.
• Promoting timely payment for MSME’s by large corporations by not allowing them to claim the expenses until the payment is done.
• Tax rebate on income of up to 7 lakh rupees under the new Tax Regime. Standard deduction of Rs.50,000 was also introduced to promote the new tax regime.
• Massive hike in tax exemption on leave encashment of non-government salaried employees. From Rs. 3 lakh to 25 lakh.
• Massive capital investments on infrastructure development which will create new jobs for the youths.

But then, there are a few drawbacks as well, and I would like to showcase both sides of the coin. Because being a financial expert my eye is always on the return on investments, the saving part and how much benefit the masses get in that arena. So…

• No benefits for the investors under the new tax regime. Old tax regime was better for people with income higher than 7 Lakh.
• The country's poor citizens, whose survival has been severely hampered by the pandemic, have been condemned for the Budget's failure to address their situation. According to some experts, a capitalist approach to budgeting will only make the wealthy even wealthier and the poor even poorer.

To overcome the drawbacks, we must take initiatives to promote skill based education for the poor and lower middle class. Teach them how to fish rather than giving them the fish.

MS: With the recent increase in defence budget due to China threat, what would be your expert advice on how India could have balanced defence and education budgets more effectively?

CJ: Defence budget this year has grown by 13% as compared to last year’s budget. 5.94 Lakh Crore in defence budget out of which 1.62 Lakh Crore towards capital expenditure to purchase new assets and the rest is going towards salaries and pensions of the soldiers. This according to me is well planned. Only Rs. 10,000 Crore has increased on Capex rise as compared to the last year. Any country needs to invest in increasing the defence infrastructure especially when we are facing unfavorable geo political situations. Rs. 2.92 Lakh Crore is going towards salaries and pensions of the soldiers. I appreciate that as the government is considering the welfare of our soldiers.

Education budget has increased by 11.9% approx. Last year it was 1.04 Lakh Crore which has gone up to 1.12 Lakh Crore. However India is quite behind as compared to other countries when it comes to the education budget. I would not recommend cutting down the defence budget and allocating the same to the education budget as the current scenario doesn’t permit us to do so. However, the government can certainly bring huge positive change by reforming the education fees of private sectors. Also, the GST on education services should be reduced to promote learning.

MS: In your expert opinion, what is the future outlook for the Indian economy in the next 10 years and what measures can be taken to improve its performance?

CJ: According to a report by Morgan Stanley; “India is on track to become the world’s third largest economy by 2027, surpassing Japan and Germany, and have the third largest stock market by 2030, thanks to global trends and key investments the country has made in technology and energy.”

I am a believer in India’s growth journey in the coming decade. India is already the world's fastest growing economy. If the ease of doing business is taken care of well and if there are positive tax reforms that can serve the middle class, we are all set for a win. But then, there are few major sectors that need to be taken care of; I am also sharing why.

• Reform the Banking System
  The Indian economy is supported by its banking sector. In the industry, the government is a significant player. Public sector banks that are owned by the government hold close to 70% of all banking assets. The least profitable banks are those in the public sector, nevertheless. The increase in subprime loans is a major factor in this. So, the government is forced to utilize tax money, which could have been used to spur economic growth, to pay for these loans. In order to help banks identify problematic loans early on, a sound policy must be put in place.
• Creating New Jobs for Youths
  This can be achieved by investing in skill based education and making the youths job ready. There are various projects already in place. Youths should take the benefit of these schemes.

1. Pradhan Mantri Kaushal Vikas Yojana
2. Jan Shikshan Sansthan (JSS)
3. Pradhan Mantri Kaushal Kendra
4. Pre-Departure Orientation Training (PDOT)
5. India International Skill Centres (IISCs)
6. Pradhan Mantri YUVA Yojana (PM YUVA)
7. SANKALP (Skills Acquisition and Knowledge Awareness for Livelihood Promotion)

• Interest Rates on Credits Need to Be Decreased
  The government would need to think about further dropping the reverse repo rate to encourage banks to extend more credit to consumers in order to boost employment. Banks would be encouraged to lend when they can earn less by keeping money in the reserve with the RBI. Consumers will be able to borrow more money when interest rates on loans are lower. They'll next make investments in real estate and make more purchases of things. More purchases and investments will increase demand, which will encourage businesses to make more investments and hire more workers. More jobs will eventually be created as a result of this.

MS: Talking more about the interest rates, with RBI's sixth time interest rate hike in February 2023, how can people better manage their loan EMIs and what precautions should new loan borrowers take to prepare for future interest rate increases?

CJ: There is only one thumb rule to manage your EMIs is that your total EMIs should not increase 30% of your monthly income. So if you’re earning Rs. 1 Lakh per month, your EMIs should not be more than Rs. 30,000. I will talk about a very beneficial ‘6 JAR METHOD’ later in this interview via which one can save and invest more for the future with the rest of the amount. But if your EMIs increase from 30% to 50% or more, you are going into a debt trap and it will take a long time to come out of it. I am now sharing some additional alternatives to think about:

• Decide on a floating interest rate.
  A floating interest rate changes depending on the state of the market. A floating component will be added to the base rate used to calculate interest, ensuring that when the base rate changes, so does the floating rate. The EMI will reduce together with the rate reduction because they are correlated to market conditions.
• Option to increase EMI
  When their interest rates are raised, current house loan borrowers should choose the EMI increase option with the approval of their lenders. Choosing the EMI increase choice will provide cheaper interest expenses than choosing the tenure increase option. To lessen the strain of interest repayment, borrowers can also raise their EMI payments by 5% annually. They may decide to tie this raise to a raise in pay or any other annual bonus. They can also pay one additional EMI each year (in addition to the standard number of EMIs). Combining the two—paying one extra EMI each year and raising the EMI payment by 5% each year—will greatly lessen the amount of interest owed.
• Change the bank for the loan and select the overdraft option
  High-interest loan borrowers can reduce their EMIs by transferring the remaining debt to a bank/lender with a lower interest rate, and opt for a home loan saver/overdraft option. This option opens a savings/current account connected to the mortgage account, allowing the borrower to deposit surpluses that are deducted from the total loan amount to reduce the interest cost. Withdrawals from the savings/current account are permitted, and negotiating with the existing lender to reduce interest rates is also an option.

MS: Financial experts have observed that the younger generation these days has higher income than what we had in our haydays; despite this they are low on low savings and high on EMIs. What would be your advice to them, to maintain a financially sustainable lifestyle and avoid financial stress?

CJ: I suggest investing at least one hour per week to learn about personal finance management. Also share your financial journey with your loved ones so that you can keep them in the loop and get their valuable inputs. Beyond this, I am sharing some pro-tips again which give a huge benefit in the long run.

– Avoid getting into the debt trap, as far as possible.

– Make sure that your EMIs do not exceed 30% of your monthly income.

– Don’t compare your personal finances with anyone else.

– Avoid impulse purchases.

– Wait for 30 days before you buy any next big ticket item.

– Use only the 30% limit of your credit cards and pay them off within 2 weeks. Do not delay your repayments.

MS: What would be your expert advice for Indian investors looking to invest in cryptocurrency and recover from previous financial losses?

CJ: I have always been conservative about investing in cryptocurrencies. You should only invest on the platforms that you totally understand how it works. Blockchain technology which is the backbone of cryptocurrencies is a groundbreaking technology. However, if you don’t understand how it works, you shouldn’t invest in it. It is at an early stage and therefore it is highly volatile. I consider it to be a high risk investment. So if at all you are a crypto enthusiast and are keen to learn about the new technology, I suggest you only invest your “Sandwich Money” in it - which means you only invest the amount that you would spend on buying your sandwiches in a month for which you should be okay even if you lose it forever.

The other thing is to invest that “Sandwich Money” in stable coins such as Bitcoin, Etherium and not any emerging coins. Don’t get lured into “high interest” or “high returns” trap, as many of the investors have lost lakhs and crores in the greed of this high returns.

The Cryptocurrency market is highly unregulated and therefore any newbie can pay 50 to 70 thousand dollars and launch their own crypto on Ethereum network. for eg. Ronin network, lure greedy investors by promising high returns and then eventually disappear. No government or law can then back you up as there are no regulations on it yet. So be careful and don’t just go with the hype of Crypto and NFT until you understand it to the core.

MS: As a financial management expert, what advice would you give to current and future investors during volatile market conditions?

CJ: Each one of us needs to keep four things in mind, this applies to one and all irrespective of what you earn.

• Have emergency funds in place. Your emergency funds or I like to call it Abundance funds should be 6 to 12 times of your monthly expenses.
• Review your risk appetite and risk tolerance
  Risk appetite is your financial ability to accept a loss, whereas risk tolerance is your capacity to emotionally tolerate significant price changes. Market declines may serve as a reminder to reevaluate your risk tolerance, but we advise delaying until you are calm. Ask yourself, Do you have enough money to accomplish short-term objectives? The ideal place to put money that you'll need soon or that you can't afford to lose is in relatively stable assets like money market funds, Fixed Deposit (FDs), or Treasury bills. If you're retired, having your next year's worth of living expenses—along with a few more years' worth—in a bank or corporate FD or money market fund is a must.
• Make sure your portfolio is diversified. Don’t put all your eggs in ONE basket.
  Volatile markets also can reveal your portfolio whether it is truly diversified or not. Now is a good time to re-check your portfolio if you haven't done so in a while to ensure that you know how each asset class is performing and that the mix matches your desired asset allocation.
• Think long term
  Markets often suffer ups and downs, and over the course of a lengthy investment journey,, you're likely to witness a number of sizable falls. However, even bear markets—i.e., those where the market plummeted by more than 20%—have traditionally been shorter than bull markets. All investors would do well to ignore the noise and remain focused on their plans because it is practically difficult to time the ups and downs of the market.

MS: How can middle-class investors beat inflation and grow their savings in the next 5 years, given the limited salary hikes during the COVID-19 pandemic?

CJ: I would like to share the 6 Jars system of money management to grow and be safe in present times. In good or bad times, this is a time tested formula shared by my mentor T.Harv Ekar with me.

1. Necessity Jar - 50% of your monthly income should be allocated to your basic necessities. For eg. Rent, E.M.I’s, Utility bills, School fees, groceries, daily expenses, etc.
2. F.F.A. Jar (Financial Freedom Account) - 10% of your monthly income should be allocated for your investments. This is your seed money and you should never touch this money. This money will grow with compounded interest over a period of time and help you become financially free, where your money is working for you to take care of your monthly and yearly expenses.
3. L.T.S.S. Jar (Long term savings for spending) - 10 % of your income should be kept aside for any big ticket expenses that you want to plan. For eg. buying your dream home or a car.
4. Education Jar - 10% of your monthly income should be invested on your personal development. Whether it is learning a new skill or going to a seminar to upgrade your knowledge. The world is growing faster than ever and if you stop learning, you stop growing. So it is important to invest in yourself.
5. Play Jar - 10% you can use it to enjoy your life! You can go for that holiday or plan a nice candle light dinner with your spouse. Or treat yourself with a movie and good food. Whatever makes you happy, you should have fun and reward yourself for doing the hard work. This also increases your motivation to earn more.
6. Give Jar - 10 % you can give it to those who need it more than you. You can give in cash or kind. Maybe sponsor the education of kids who are in need or help someone to have a nice meal. Whatever cause is close to your heart, you should contribute at least 5 to 10% of your income. This increases your fulfillment and inner joy. Once you discover the joy of giving, it becomes a positive addiction.

Pro Tip: If you’re single, you can put more in the FFA Jar, for eg, 30% and cut down on your necessities. That is the fastest way to reach your goal to achieve financial freedom.

For couples, you can either combine your incomes and follow 6 Jars or you can do it individually. I recommend combining it as it builds more trust in the relationship. However you can always keep aside a certain amount from your play money for yourself to enjoy your hard work.

MS: How can the youth of India create better employment opportunities in a nation facing limited resources and a growing population?

CJ: There can be a lack of resources, but that should not be an obstacle for us. That should be an opportunity for us to be more resourceful. In India, we are well-known for our resourcefulness, also known as "Jugaad," which is precisely what our country needs. Rather than sitting and waiting for the right resources, we should create opportunities for ourselves. In this information revolution, there is no limit on what you can learn to do. With the presence of learning platforms such as YouTube, Google and now ChatGPT, it is inevitable to discover anything you wish to. The only factor is your MINDSET. You must Master Your Money Mindset, by having the right outlook of your present situation. Even if you are not in a good financial condition, you must know that there are infinite opportunities out there waiting for you. If you have willingness to learn and a passion to solve problems, no one can stop you from thriving. That’s what I firmly believe. India’s growing population is a challenge but it is also a blessing in disguise.

MS: How can financial education be integrated into the National Education Policy (NEP) at all education levels (school, college, post-graduate) to benefit the masses, especially women, and prepare for financial emergencies?

CJ: I believe that financial education should be part of the curriculum 5th grade onwards. Money management should be taught to kids with fun games and activities.

They should also have internship programs for kids to work during their summer vacations. Children should be encouraged to learn about business by working in small businesses and their entrepreneurial journey should be encouraged by teaching them some basic jargons like sales, marketing, profit, loss, etc. The best way is to learn by doing it practically.

Women are the best money managers in our country. If only they get proper education and support, they can truly be versions of Goddess Lakshmi for us. Today, with the access to smartphones and internet, there are so many possibilities to train the young ones towards their bright financial future.

Money talks should no longer be a taboo for families or schools. It should be a part of daily conversations to bring more trust in relationships. Learning about money becomes fun if the teacher who is teaching has positive beliefs about money.

MS: As a financial management expert, what would be your five-point advice for national and international students readers, seeking to improve their financial literacy, till NEP comes up with better plans?

CJ: I am sharing a five-point strategy that will come to help for anyone and everyone who is looking to grow their financial skills, because this is the need of the hour.

1. Learn how to plan your personal budget and stick to your budget. This will help you to prepare yourself for the real world. If you don’t have a budget, you will end up in a debt trap or credit card debt.
2. Follow the 6 Jars system and see the results flow. Start saving for your future from now. Saving even 1 rupee per day can lead to a huge change in your money psychology as you are creating a new habit. Remember, habit is more important than the amount. So create that empowering habit of maintaining 6 Jars.
3. Learn the power of compounding interest
   For long-term investments (7+ years), opt for equity mutual funds. For mid-term investments (3-5 years), invest in government or corporate bonds rated A- and above. Avoid anything below A-. For short-term investments (1-3 years), consider liquid mutual funds, bank fixed deposits, or corporate fixed deposits. Investment decisions should align with one's goals and risk appetite. The power of compounding is best utilized by staying invested for a long time.
4. Get a coach/mentor who can guide you through the journey of personal financial management. Be accountable to that mentor so that you succeed in achieving your goals.
5. Master the art of communication. One who can communicate well and has better interpersonal skills will always outgrow the one who has just the technical knowledge. So learn to communicate well.

MS: What steps are necessary to become a financial management expert, and what are the future prospects for the field in India and globally in the next 5 years?

CJ: One should be open to learning everyday. You should have a growth mindset to become a financial management expert. This is an ever changing, evergreen field where possibilities are endless. You can never learn enough about money management and business. As the world is changing at a pace where we constantly need to be updated, we should keep an open mind to learn about it from reliable sources.

Follow these 3 steps to become a financial management expert and make it a career.

1. Do a program on it by a well known institution such as NISM.
2. Dedicate at least 1 hour a day to learn about financial management from various books, newspapers and online content from reliable sources.
3. Have a focus in mind to help people solve their money issues.

Diligence and dedication towards consistency in learning the above and practising the same is the final word.

About Chinmay Joshi

Since 2010, Chinmay has helped thousands of individuals from all walks of life to choose the correct path and experience breakthroughs in their financial plans. He is helping individuals achieve their highest potential and strategically guiding them to achieve success in their personal finance which will help in every area of their lives through his videos, seminars, and TV interviews. He has worked with people from various backgrounds which includes Corporate Executives, Doctors, Army Officers, Police Officers, Athletes, Bollywood Actors, and Students. He is an AMFI certified Mutual Fund Advisor as well.

About the Interviewer

Mahima Sharma is a Senior Journalist based in Delhi NCR. She has been in the field of TV, Print & Online Journalism since 2005 and previously an additional three years in the allied media. In her span of work she has been associated with CNN-News18, ANI - Asian News International (A collaboration with Reuters), Voice of India, Hindustan Times and various other top media brands of their times. In recent times, she has diversified her work as a Digital Media Marketing Consultant & Content Strategist as well. Since March 2022, she is also an Entrepreneurship Education Mentor at Women Will - An Entrepreneurship Program by Google in Collaboration with SHEROES. Mahima can be reached at media@indiastat.com

Disclaimer : The opinions expressed within this interview are the personal opinions of the interviewed protagonist. The facts & statistics, the work profile details of the protagonist and the opinions appearing in the answers do not reflect the views of Indiastat or the Journalist. Indiastat or the Journalist do not hold any responsibility or liability for the same.