Wednesday, May 25, 2011

Mantra for Fit and Healthy Life - Financial Planning

Mantra for Fit and Healthy Life - Financial Planning
Must be thinking what's the relation of Financial Planning with healthy life.

Not directly, but indirectly for sure there is a very strong link between them. I believe that a financial plan can keep your sugar level in control and would not allow your blood pressure to pop up.As freebies it also helps in creating a strong family bonding, caring and respect for each other.

During my financial planning practice and writing plans for my clients. I found that most of the individual wants to live life today and is not worried about future. First priority for them is to spend money on everything they require, leisure, shopping, purchasing white goods and if anything left is being invested.

Most of them have never thought of how much amount they would require to fulfill their goals. If some of them have done that, then it is on the basis of present cost without accounting for the inflation. Forget Goals and dreams they are unaware of even what they would require to maintain their present lifestyle.

According to me there are three kinds of Investors:
  1. First -Who don't want to compromise on their present and leave future on god. They don't believe in saving or investing.
  2. Second- They know what they would require. But not able to cut down on their discretionary expenses and just invest the surpluses (If left). They are ready to compromise their future instead of cutting present expenses.
  3. Third - Have strong will power Knows what they require. Take help of professional . Plan it, tries to start cutting on unnecessary expenses, allocating funds to different asset classes depending on their requirements. They take benefits of all the 3 Musketeers of Investing i.e Starting Early, Investing Regularly, and remain invested for longer period.
Most of the Diseases are result of present life style and financial worries. The third category of investors who follows Financial planning process knows it gives them freedom from all the worries and insulates them from lots of disease which are babies of present lifestyle and needs. Let's see how :

Key to proper financial planning is as follows:
  • Budgeting : The first step in financial planning process is budgeting. The prime requirement for every house hold is to have budgeting in place. Since years my parents used to jot down the bigger purchases to be made during the year and used to prepare a budget for such bigger exps. and subsequently monthly budget for groceries etc. It also helped us to come close as a family. We saw our parents sacrificing their needs for us and subsequently we also learned the same and started doing same for  our siblings. 
Even today the practice is very relevant the requirement is to stick to it. It helps in avoiding impulsive buying of the goods which are not the necessity. I have seen people changing mobile, Television, Two Wheelers every year or cars every three years...

It is said that "Need is the mother of all inventions" But in the world of advertisement and media it should read as "ADVERTISEMENT - Making all inventions a need for individuals".

An unexpected expense creates tension, which might in long run become a reason for hyper tension. Plan your Budget and stay away from it.

  • Cash flow: We should keep a diary near our bed and inculcate habit of writing expenses on daily basis. The proper integration of expenses under different heads would help us to find out what are the expenses which were discretionary in nature and which were not. If we would have the records we can always see that how many times we dined out or partied, or had been to multiplex to watch movie. By reviewing the list can reduce unnecessary expense and surplus can be created for future goals.

By making a cash flow we can have a good night sleep. It will cut down on dining out, avoiding eating Oily, Spicy and food containing artificial ingredients, alcohol, smoking etc...leading to a balanced life and can save us from hyperacidity and High Cholesterol.Keep your Lungs and liver healthy.
  • Identification of Goals: In present inflationary environment it is necessary to identify our goals and the requirement of funds.
I have come across a case wherein the client was having enough saving to meet up all his future goals and dreams. But had a portfolio having equity weightage of 80%.Does he require to take such a risk and to have unnecessary tension in case market turns bearish. 

By knowing what our dreams are and planning for it properly, we can keep our blood pressure level under control.

The other constituents of financial planning apart from above are Net worth statement, Asset allocation, Insurance need analysis and reviewing  financial plan regularly will take care of our financial as well as physical well being. The entire process ensures that we are prepared well in advance for all financial responsibilities and will help us to stay away from hyper tension, High Cholesterol, Acidity, Blood pressure.

There is not much of difference in approach of investor's as well as patients. Even the patients are of 3 types :

  1. First one are on suicidal path who do not want to take medicine neither compromise on life style with an attitude " Ek din Marna sab ko hain, Jo hoga dekha jayega".
  2. Second ones are ready to live entire life on medication without compromising on present lifestyle. Eventually power,frequency and quantity of medicine keeps on increasing.
  3. Finally third one who have strong will power. Thinks that I will not leave my entire life on medication. They take all the precautions, exercises, avoids eating Junk food, maintain a proper lifestyle and finally nullify or even able to cure the disease.
 Actually, financial planning inculcates a discipline and can shift people from first and second category to third which will keep you fit and healthy.