"With money in you pocket, you are wise and you are handsome and you sing well, too." ~ Jewish Proverb
Did we ever travel to another city or country
without a prior plan? We would think about when to start, what mode of
transport to opt, where to stay and how long to stay ………. questions galore. If
one deliberates so much for a short trip/vacation then, how could we not have a
plan for our lives? Could we just live and hope to achieve various goals/needs
through the way?
Financial planning hence forms an important
aspect of our lives and in realization of our dreams. Most grossly
misunderstand FP is limited to the higher income individuals or HNIs but it’s
no less important for any income earner and mostly for any dreamer. Every
individual has needs/aspirations/dreams to achieve in their lives and for most
of these require money. FP doesn’t always mean Retirement planning or children
education/marriage planning but more mundane and diverse activities in life.
How about creating a corpus so that you may use
it for charity/donation on a regular basis or a plan to create alternate revenue
to supplement your monthly EMI or may be a corpus to finance entrepreneurial
aspirations of your sibling/spouse? The list could go on, limited only to your
imagination. But, to achieve any of these one needs to plan. And likewise your
travel itinerary, it involves quiet some deliberations.
Continuing the analogy of vacation plan, one first
needs to decide upon the destination, here the financial goal. It involves in
translating into financial cost of the dream/aspiraton with some realistic
assumptions. For instance, if one were to plan a pension of 20K per month at
the time of retirement, one need to consider the possible inflation rate and
then arrive at a realistic figure for the proposed time. This forms the first
step of identifying the goal.
Once the destination is decided, the mode of
transport is opted. It could be by rail, road, air or a combination of all.
Similarly, once the financial goal is set the next step is to find the various
alternatives to achieve it. How could one pick the right one among the innumerable
instruments available in the market? This involves in understanding one’s limitations
viz., time period, risk appetite and comfort. One needs to dissect each
available option if it fits to the goal. This forms the Need Based Analysis.
As the old adage goes: Don’t put all the eggs in
one basket, one needs to spread the risk so as to achieve the optimal
risk-adjusted returns. While doing this, one needs to diversify not just the
asset classes but also get invested in the complementary instruments within the
asset classes. This mitigates the risk of the entire portfolio without much
compromising the returns. This part of the planning is called Risk Reduction.
Frank Hubbard once said that the safe way to
double your money is to fold it over once and put it in your pocket. Humor
apart, if one needs to create wealth one needs to start investing; this
involves the most important step – action. One needs to move out of the inertia
and continue to allocate money to the agreed plan.
The next step is to monitor and review the plan
at regular intervals. Most individuals lose patience as either things didn’t
pan out as planned or forgot to re-visit the plan, which could turn into a
costlier mistake. One should regularly check how the planned portfolio is
affected to the ever changing market conditions and take steps to maneuver
accordingly.
As you rely on an experienced or established
travel agent or tour operator to plan & execute your important vacations,
you need to also consult a reputed or recognized financial planner to help you
define, determine and devise a formidable plan to achieve your goals.
Happy Planning, Happy Investing and Happy
Achieving Dreams!!!
"If you can count your money, you don't have a billion dollars." ~ Jackie Mason
