As a new financial year begins, I take a walk down memory lane and remember what I did more than two decades ago and what I would do differently if I could revisit my younger self today. It was the sixth year of my career and the latest hike just made the cut to begin paying taxes. I remember the joy of the increased salary getting deflated like a balloon on hearing that taxes will actually take away most of the hike. I opened my Public Provident Fund (PPF) account that year and then 16 years later collecting the corpus. You can read about that story here.
As first income earners, our first investments are usually linked to saving taxes and making it to the Section 80C limit. Several years pass for most people before the fact sinks in that this exercise is to be done every year. Year after year. The March-end rush to look for an investment to hit your money with is actually counterproductive. It benefits those selling products with high commissions because they are waiting for people who leave it to the last few days of the tax-saving deadline, to reel in with high-cost products with limited benefits. One of the most common problems in portfolios of middle-aged Indian middle class people is the kachra of multiple life insurance policies. Each year the agents will come and sell you something new and by the time you are 40, you have 10-20 policies. These people failed to see long term, looked at each year as a single tax-saving opportunity and did not look at their long earning years as a continuum.