Written by Suresh Kumar Narula
Keep Your Financial Life Simple — The Power of Simplicity in Wealth Creation
We often have simple and effective ways to organise our financial lives, yet we knowingly choose complexity. We keep saying we want to “simplify, simplify, simplify,” but deep inside, we believe that important solutions must be complicated. In reality, simplicity is the highest form of sophistication — it is both beautiful and functional.
During financial planning, many clients get disappointed when we recommend “simple, plain-vanilla” products. They fail to recognise that simple actions often create the greatest long-term impact. On the contrary, people are drawn toward complex, exciting products that promise quick results. They enjoy exploring “what’s new in the market,” even if they don’t intend to invest.
The truth is simple: You don’t need extraordinary strategies to build wealth. You only need to follow basic personal-finance principles.
1. Clean Up Your Savings Account
Many self-employed professionals — and even well-paid salaried individuals — knowingly keep large amounts idle in a savings account earning just 4% interest.
Meanwhile, idle money earns less than inflation:
- Inflation (5–6%) reduces purchasing power
- Savings rate (4%) means a loss of 1–2% yearly
- Liquid funds can earn 2–3% real return after inflation
In the past decade, liquid funds delivered around 7.8% CAGR — almost double the return of a savings account.
Action point:
- Sweep excess money monthly into a liquid mutual fund
- Withdraw anytime when needed
2. Set Realistic Investment Goals
Investing doesn’t start with money — it starts with realistic goal-setting.
Many new investors expect impossibly high returns (e.g., turning ₹6,000/month into ₹10 lakh in five years requires 40% yearly returns — unrealistic).
Your major goals are predictable enough to plan for:
- Children’s education
- Retirement
- Home purchase
Automate discipline: Use SIPs to enforce consistent investing via automated deductions.
3. Increase Your SIP with Time
The magic of compounding works only when both time and contribution grow.
Example:
- ₹15,000/month SIP without increase → ₹1.97 crore
- ₹15,000/month SIP with 10% yearly increase → ₹3.03 crore
That is 54% more wealth simply by stepping up SIPs annually.
Rule:
- Increase SIPs every year by 10% (or at least inflation rate)
4. Clean Your Investment Portfolio
Many investors clutter their portfolios due to behavioural mistakes:
- Buying too many funds
- Not exiting poor performers
- Selling winners too early
A minimalist portfolio is easier to track and performs better.
Ask yourself: “If I didn’t own this investment today, would I buy it now?” If not — exit.
5. Exit Insurance-cum-Investment Plans
Traditional insurance plans are expensive and deliver poor returns (5–6%).
People continue them thinking they will gain more at maturity, but the opportunity cost is very high.
Surrender and reallocate. Don’t throw good money after bad — sunk cost is sunk.
6. Buy a Term Insurance Plan
Insurance is meant for protection, not returns.
Term plans give the highest cover at the lowest cost.
Don’t rely on thumb rules. Calculate cover based on:
- Living expenses
- Inflation
- Debt
- Family needs
- Future goals
7. Increase Your Health Insurance Cover
Medical costs inflate at nearly 10% per year. Cost-cutting here is dangerous.
Choose policies with:
- High coverage
- Short waiting periods
- Large hospital network
- Generous room rent limits
Conclusion: Simplicity Wins
The foundation of strong financial planning is simplicity.
Simple investments offer:
- Clarity
- Control
- Transparency
- Better decision-making
When plans succeed, you know why. When they fail, you know why.
Simple ideas perform best because their outcomes are easy to measure, monitor and correct.