Every individual, no matter at what stage of life they are, wants a safe and steady financial life, especially when they are not yet aware of what is cibil and how it impacts their finances. And besides worrying, not many take the most important step towards strengthening their finances, i.e.to, start investing early in life and ensure to know how to check my cibil score.
As soon as you realize the importance of cibil score and that you have started earning a decent salary, or you are in a position to save even your pocket money annually, you should immediately start investing a portion of it without getting stuck on the thought that the small amount you invest at this stage won’t be beneficial in the long run. A stable investment every month or year on a continuous basis will ultimately make your future better, and you won’t ever regret this decision.
Even if you are still not convinced with this, the following benefits can help you understand why investing at an early stage of life is a smart decision.
The power and magic of compounding – Just like knowing what is cibil are important for someone who wants a good credit score; understanding compounding is necessary for investing.
This factor is the driving force for this decision of investing in the early stages of life. When you continuously reinvest your earnings, you increase your return on investment multiple times.
To understand this concept, let us take this example.
Ankit starts saving Rs750 per year from the time he is 20. After 15 years, he stops investing money. On the other hand, Sumit starts investing Rs5, 000 per year when he is 30 and continues investing this amount every year till he is 60.
Both get to earn a 15% post-tax return per annum on their investments.
Ankit’s Rs750 annual savings between age 15 and 30 will aggregate to Rs27.7 lakhs by age 60, whereas Sumit’s Rs5, 000 annual savings between age 30 and 60 will aggregate Rs25 lakhs.
Through this example, we got to know that a person, who started investing early, got more return even though he invested for a shorter duration than the person who started investing later for a longer period of time.
Somewhat similar is the case with credit score’s maintenance too. It’s not overnight magic. You have to constantly remind yourself to check my cibil score every month and take the required steps to maintain it so that you remain financially ready to take a loan or credit card whenever the need arises.
Efficient risk management- Risk is the possibility that a negative outcome of your investment may take place due to various reasons, like market and business conditions, inflation risk, natural calamities etc. Investing early buys you more time to learn from your mistakes and correct them as you get a real-time experience of how the market behaves, and also, your past mistakes make you wiser.
Amidst all this, do not forget to convert your thought to check my cibil score into action, as this can go a long way in maintaining strong credit health besides the disciplined financial investments and planning.
And with portfolio diversification, you can manage the current as well as the expected risks very well. You can do so by having a good mix of equity and debt securities in your portfolio. And besides this, another step to strengthen your financial health is to know what is cibil score and how it impacts your financial life in multiple ways.
Learn financial control at an early age– With the process of saving and investing regularly, you develop the habit of spending less and become more disciplined in your financial decisions. You can differentiate between what you actually need and what you want. For example, at age 15, when you save Rs.200 per month (Rs.2400 annually) and invest it, you will be much more disciplined in your finances than the other teenager who isn’t saving and investing because you would have your monthly targets of saving and thus you would derive ways to control your spending and let go of your unnecessary wants and desires. In future, you can use this money to start your own business or go on vacations and lead a better life.
Helps to stay ahead of inflation- Inflation is that part of the economy which worries the current as well as potential investors. Inflation is basically the rising price of goods and services. The value of Rs.100 today may not be the same after a year as you won’t be able to buy the same bunch of commodities after a year, which you are able to buy today with that Rs.100. So how does it affect investments?
Let us take an example. If you buy securities offering a return of 5% and the inflation rate is 6%, then your real return on investment is minus 1%. So, you must invest in a security offering of at least 6% or above. Thus long-term investment and inflation investing help the investor foresee risks and take timely decisions to fight various possible hindrances.
Just like it’s important to check inflation and make changes in your portfolio periodically, why not also give the thought of checking my cibil score equal importance every month? After all, periodic checking of credit score is important once you get to know what is cibil. Remember, the entire concept of cibil score is vital for every investor and borrower to understand so that their credit habits don’t harm their overall financial health, especially when investing.
Handle uncertainties efficiently– Emergencies are something that can occur anytime, anywhere and with anyone, like some relative meeting with an accident or you yourself falling extremely ill. So, health insurances aren’t the only solution. Starting to invest early will also help you in this. It helps you to save and collect ample amounts not only for the later stages of life but for every stage of life, including such emergencies. Since you started investing early, you are able enough to tackle and handle any financial, medical or other emergencies which arrive in life because you have the required money, which has grown multiple times since the time you invested.
Hence, the wisest decision one can take in early life is to not just to understand what is cibil & why it is important to monthly check my cibil score. But also start investing, even if it’s a small amount. That small amount, when invested regularly for a longer period of time, will definitely lead to multiple benefits, as mentioned above. The power of compounding should be enough to compel one to start investing right now. Because ultimately, an action postponed is an opportunity lost.