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Are you financially prepared?

Author: Balaji Rao/Wednesday, June 6, 2018/Categories: Financial Planning, Expert View

Are you financially prepared?

Being disciplined is generally not in our genes; don’t get offended please, but I am telling the truth. How many of us go to the gym every day? How many of us jog every day? How many of us at least walk for 40 mins every day in the nearby park? How many of us have decided to quit smoking or drinking completely and been successful? How many of us have resisted eating that extra jamoon or jilebi or that wretched paani poori? How many of us have made innumerable resolutions that have not been met at all? Just look at your waistlines before you answer any of these questions!

If all of us would get 100 per cent disciplined our bodies would be as chiselled as Hrithik Roshan’s or as curvy as Kareena Kapoor’s. But many of us have no mental strength that’s why there are only handful of people in this world who have great bodies and the rest of us have to keep pushing our bulging tummies inside when we tuck our shirts into our pants and the poor belt threatens of committing suicide!

Building wealth is not about being rich but it is about being able to meet the life goals successfully and efficiently and more importantly without availing loans because loan is always a trap which we invariably fall because of our ineptness when it comes to our own money management skills (or lack of it).

Investing is all about understanding our life goals; when we get married the first responsibility starts and the next starts when a child arrives. Over the next 20–30 years several events would start unfolding that requires financial readiness and here comes the importance of being disciplined with our investing practices and choice of asset class.

If presently the child is one year old, it is quite obvious that 17 years and 21 years from today graduation and post-graduation would happen. These two become important events that require financial readiness. Further, if you are 32 years, married and parent of a child then you would be retiring some 25 years from the present year which also calls for financial readiness.

Is it rocket science to understand the aforementioned events would require sizeable amounts of funds as education fees and retirement corpus?

Once the goals are understood and the year in which the respective amounts are required, after accounting for inflation, investing plan should commence. Shorter goals such as upto 48 months should be in debt instruments and from the 60th month onwards equity oriented instruments should be ideally chosen.

After accounting for inflation at about 6 per cent over the future years the amount that would be needed can be arrived at and then choosing the right medium of instruments should happen. Since we are discussing about the farthest events of life the biggest luxury is time and age which should not let go waste. Early bird catches the worm, isn’t it?

Financial readiness is extremely critical for today’s young married couples with kid/s. If not planned early and with diligence, availing hefty loans cannot be averted. Start early, invest wisely and reach your goals efficiently. Start your discussion with an efficient financial planner without wasting any time.

The author has written 6 books on investing and personal finance. He has 23 years of experience and 6 years in academics

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Balaji Rao
Balaji  Rao

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