Today, we are living in a closely knit world, yet separated by more differences and challenges.
While news of geopolitical conflicts, raging wars, economic slowdown in many parts of the world brings anxiety and worry, a sense of hope and confidence is increasing in India due to the consistent economic growth.
What future holds is unknown with external factors beyond our control. Therefore, what is in our control needs focus and action. The time to do is NOW!
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- Achieve Emotional Equilibrium
Greed to make a fortune in rising economy or fear of uncertain future; both lead to incorrect financial decisions or even indecisiveness. Calm mind and rational approach will help in such contrasting times. - Strategically protect life risks
Income protection of earning members to secure financial future of the family is critical, especially when uncertainties surround us. Adequate insurance to protect risks such as Early Death, Disability, Hospitalisation is a must. Standalone health insurance in addition to employer provided group cover is essential to cover hospitalisation expenses during lay-offs, gap in job transition and most importantly during retirement phase of life! - Save for the rainy days!
Regardless of your occupation, maintain contingency fund equal to approx six months of household expenses plus loan EMI’s. In case of emergency or income loss, contingency fund will help protect other assets. - Spend wisely
Capitalism thrives on producing and selling what may not be required. A clear differentiation between need and want, is the key to wise spending. Budget your expenses to identify leakages and wastages. - Avoid the ‘debt trap’
Loans to gratify wants is a proven way to run into financial stress; sooner or later. Keep loans to the minimum, with EMI’s capped to 30-40% of net monthly income. For loans on floating interest rate, ensure revision in interest rate is applied on time by your bankers. - Commit to financial goals
Financial goals are the compass to stay course and build wealth. There will be ups and downs, the very nature of life & markets. Short-term correction in equity funds especially during first 6-7 years is natural. - Asset allocation is the key
A diversified, unbiased mix of asset classes makes the financial plan strong and stable. Performance of asset classes is generally cyclical, and each has a role in building wealth. Occupation, income, holding time, risk profile, age and health are some of the factors to determine asset allocation %.
Let us imagine a festive feast prepared by a grandmother, variety of flavours and textures leading to fulfilment. Asset allocation is akin to that in a financial plan. - Periodic Wealth check-up is a must
A financial plan which is dynamic and relevant with time remains effective! Changes in family size, career, health, economy, government regulations, compliances etc affect the financial plan. To stay aligned, ‘review’ once a year is worth it! - Prioritise health and fitness
This point may appear out of context. However, fact remains that health impacts creation and retention of wealth. An agile mind and active body is more productive and capable for challenges. Moreover, staying healthy can keep the medical expenses away. - When in doubt, reach out
Even with a sound financial plan, an unexpected situation may present itself. Or, a random financial product, investment option may look tempting. Before making a move, seeking guidance and support of a credible professional always helps.
- Achieve Emotional Equilibrium
By- Lt Col Sunil Tandale, Veteran
09 Aug ‘24