someone who started at 22 with ₹2,500 would need to save ₹12,500 a month for 60 years to reach the same ₹2.3 crore. So that is the power of time and compound interest. So these are the stages. Then, if you are saving for goals that fall only within the first three years, choose safe options like a bank recurring deposit or FD, because PPF locks your money.
Can our store employees think about investing in buying a home? And how should they plan from a young age so that by the time they are 35 they can fulfil this dream?
Sir, I'm calling from this place. You would have received an OTP. Can you share it with me? Otherwise you will get into big trouble. Your account will be blocked. Things like this. In today's AI world, Swachand, a call may come in your daughter's or son's voice saying, 'I'm in trouble, please send this money urgently.'
Dear store team, we lovingly call you the brand ambassadors of the Titan Company. Today we have with us Mr. Ashok Sonthalia, the CFO of Titan Company. In today's part of our exclusive Gold Standard series on personal financial management, a financial expert joins me to discuss very important things in detail.
As a CFO he has clear insights. But let's see what he has to say about our store employees, our brand ambassadors. Welcome, Ashok. We are delighted to have you on this podcast series we call Gold Standard. Today's episode is about personal finance and, in particular, financial matters related to our store employees. You know that about 21,000 people work in our retail stores.
About 70% of them are under 35 and 50% are under 30, so it is a very young workforce. As you know, they are the reason for our success. How was this quarter?
Alright, thank you, Swachand. Thank you for inviting me to this important podcast. And I am very excited to be speaking to such an important audience. The quarter finished well, the company is performing well. Those 21,000 people you mentioned — the way they behave and the way they treat our customers — is why I believe Indian consumers love us. So we will perform well.
Fundamentally, our store brand ambassadors are the reason for our success. Yes, and Titan Company Limited stands on the shoulders of these 21,000 people.
Alright, for a company finance is a big thing, it is at the scale of a company. But what I want to ask you is: should an individual also protect themselves financially? Should they invest? When and how should they start?
Yes, so I don't think our lives go in a very smooth manner. You know, just like companies, there are ups and downs. In personal life there are situations, life stages, but what I want to say is the most important thing is not how much your first salary is, but your first salary starts you on a journey — a journey of saving and building wealth. What you get as your first salary is not important. What is most important, I think, is that you start saving and build a lifelong habit. Because it is time that builds wealth. The amount you start with is not important.
Alright, that is a very profound statement. Time builds wealth, not the amount you start with. So, sir, what you are saying is that even if your savings are small at the beginning, it's fine?
Yes, so let me give you an example. Let's assume someone earns ₹20,000 to ₹25,000 a month through their salary, sales incentives and so on. A person who starts at 22 and saves ₹2,500 a month until 60, at about 12% returns, that amount will become ₹2.3 crore, I would say. Alright, but another person says, 'Okay, I'll wait until my salary increases, then I can save.' Let's assume that person starts at 35. To reach the same ₹2.3 crore that the person who started at 22 with ₹2,500 reached, they would have to save ₹12,500 a month until 60. So that is the power of time, compounding, and starting early. I'm very glad you brought this up.
So ₹2,500 becomes ₹2.3 crore at 60? At the start, ₹2,500 might be a bit much, but over time it gradually comes down.
That reminds me of one thing, sir. I started my new PPF account at 28. You know there is a limit on savings in it, but over these years I was able to accumulate a considerable amount, and now it will help as my retirement fund. Similarly, there will be other investment avenues. Can we tell where to start?
See, before jumping directly into investment plans, I think people should first get a very clear idea about their goals. That is, what do I want to do in the next three years? What do I want to do in four to seven years? And what do I want to do after seven years? Only after that should you choose investment plans. Now I'm thinking about your life stage. In the first three years, some of you may want to buy a motorcycle or a two-wheeler, or get married, or pursue higher studies. You may want to work for three or four years and then go for higher education. So these are the stages. If you are saving for these goals within one to three years, choose safe options like a bank recurring deposit or FD, because PPF locks your money. So if you start saving for these goals, that saving should be in a recurring deposit or a bank FD. If you want mutual funds, you can choose a liquid debt mutual fund — I'll explain that in detail. But these are the things you should do for these goals.
Then, for four to seven years — if in the sixth or seventh year you want to make a down payment on your first home — you can go for mutual funds, particularly a balanced advantage fund that invests in both equity and debt. This way you won't face too much risk, but they will help your money grow somewhat better than those first three years' investment plans. They may give you higher returns, and at the same time they are not overly risky for that period. But for anything beyond seven years — your retirement, or your children's education, or their marriage — you should go for equity mutual funds. I can discuss that, because seven years is a sufficient time horizon. Beyond that, the equity market will definitely give you better returns than all other investment types. That is how I look at it. Split your goals and decide which investment plan goes with which goal — that is a great strategy.
Yes, alright. So thinking about our people and looking at their age, you know I already mentioned that 50% are under 30. The average income might be ₹30,000–35,000, in some cases a bit more or less — that's fine. So if someone sets a firm goal to save ₹5,000 a month consistently, over the long term, thanks to compounding, I firmly believe it will grow into a very large sum of over ₹2 crore. Yes, at the end it will be two to three crore. And hearing what you said about splitting your goals, it will really help handle life stages like marriage that come in the first few years. Besides that, is there any benefit to always keeping a little cash on hand to handle unexpected expenses?
Yes, a very important thing, Swachand. I'd like to add a little beyond your question. Sometimes we think we'll spend on our needs or monthly expenses and save whatever is left. I think you need to reverse that. You should save first, then spend. Sometimes keeping two bank accounts is a good practice. As soon as your salary comes, you can set up a standing order to automatically transfer the amount you've decided to another bank account. That's a good habit, if you prefer you can do it. So save first. Then there is a golden rule. People talk about 50-30, many of you may have heard of it. 50% of your monthly salary is for your needs — the basic needs you have to meet. 30% is for your wants — you know, restaurants, movies, wherever you want to go, those are your wants. And 20% is savings. Those just starting work and earning less can start at 10% and gradually reach 20%. But 50-30 is finance. I think everyone should follow this from their first salary. This is my most important point, because the first salary helps start this journey and build a long-term habit.
That's true, because I often go to stores. This outside world keeps pulling us in some way every second. It's a never-ending journey. Yes. New phone models are being introduced. Yes. Right, better brands are being introduced. Bikes keep getting more and more stylish and better. More stylish too. People need it. People want it, and eventually they buy it. So what I want to ask you is, if they have to take a loan, how much borrowing is right?
Yes, Swachand, we haven't fully answered your previous question about cash flow. Yes, so when you start your journey of saving and building wealth, the first thing to do is save three to six months' worth of expenses. In the investment world we call this an emergency fund. It is very important, because you never know what life will bring — you can't say when an emergency will come in the family or personally. So you must keep at least three to six months' worth of expenses in a savings account or somewhere that gives slightly higher returns, but it must be available at a day's notice or immediately. You definitely have to build this. So this is the first thing you must do. The second thing is that you must take health insurance. You know, if the company provides it, you can put it off for a few years while you're young; otherwise you must take health insurance. Because medical costs in India are rising very fast. So you definitely have to take it, otherwise a serious illness can wipe out many years of savings. So you must take care of these two things. The third thing I'd say, Swachand, is if you have high-interest debts — credit card holders who don't pay the full amount and roll it over, or loans from lenders charging more than 15% interest — first pay off those debts. Only after that will I start building wealth, and at the same time I will definitely save for the long term. So this is what I want to tell you: plan your financial future carefully right now.
The second part you mentioned — buying new things — now very attractive schemes are coming. There are many plans like interest-free EMIs, 'buy now, pay later'. So we talked about 50, 30, 20. The 30 is your monthly income — for example, let's say your monthly salary is ₹30,000. So ₹10,000 is roughly 30%, that is your 30% for wants. So you may want a good mobile phone, a motorbike, or to go somewhere. Even if you use EMI or buy-now-pay-later plans, you must keep to this 30% limit. 30% of your take-home salary — so for example, let's say your monthly income is ₹30,000. However good and attractive that plan looks, if my total monthly EMI amount goes above ₹10,000, I will be very careful, restrain myself, and walk away from that plan entirely. This is my fundamental rule of financial management, so I put it that way. There is a limit to how much you can go on your EMIs — it's good not to stretch beyond 30%. Rather than getting into these, I'd rather allocate that money later to build assets like a home.
