Topic 3: Checklist For Attaining Lifelong Financial Fitness

While some may argue money doesn’t buy happiness, we fail to understand that most of our life is chronicled around either earning or spending money. Happiness comes in different forms – Buying a dream home, providing the best education to your child, going on a holiday, and then transiting into your retirement phase where you can be financially independent. The thought itself brings you happiness but it does not come free of cost if you’re looking to convert it into a reality. While it may seem easier for a few, some of us are still juggling at the lower levels in a Maslow’s triangle. And fighting our way up requires planning, strategizing, and dedication towards achieving one’s financial goal.

Early on investment

How early in your life you begin investing has a more significant impact on the wealth creation than you can possibly imagine. To understand how an early on investment is more profitable, let us take an example.

Example – Rahul (30 years old) and Priyanka (25 years old) join an IT company as Software Engineers. Both of them decided to invest Rs 8,000 per month till their retirement age (58 years). Priyanka is 5 years younger to Rahul. What is the additional amount that Priyanka can accumulate, assuming returns of 10% (CAGR)? Rahul can accumulate a corpus of around Rs 1.46 cr in 28 years (58-30) and Priyanka can accumulate a corpus of around Rs 2.47 cr in 33 years (58-25). Now that’s a big difference. The bottom line here is the best time to start investing is NOW.
Curtail expenses by making smart purchases
If you’re looking to buy a newly launched smart phone or any other product, then wait for a while (mostly until a new product from the same brand is launched). Once a considerable duration passes by, the price of that product is bound to reduce and there you go! You’ll be saving quite an amount on the same product. Besides, make it a habit to always check for coupons/discount before making an online purchase. Try to control ‘instant gratification’ & avoid acquiring high cost Loans.

Get adequate insurance cover

Financial emergencies like hospitalization, job loss due to an accident, and emergency home repair can be difficult to deal with. If you do not have adequate insurance cover or an emergency fund, you’re most likely to break into your savings. Avoid this financial mistake by getting yourself a few necessary insurance policies. Unexpected hospitalization expenses can be dealt with a health cover; a critical illness insurance plan will provide you a lump sum amount to pay for your medical expenses when diagnosed with a life-threatening disease; an adequate home insurance will cover loss and expenses incurred due to theft or a natural calamity.

Likewise, a life insurance will provide a life cover to your family in the event of an untimely demise. Besides acting as a financial back up, insurance policies also help you save on your tax under Indian Income Tax Act.

Have effective conversation with your family

Fulfilling a financial goal requires support and involvement of each member involved. Rather than enforcing a budget, it is best that one sits with the family and discusses a mutual financial goal. Instead of straight away denying kids something they wish to buy, you may suggest them to put that on their wish list and start saving for that. One could also put up on a bulletin board the family’s financial goals and areas where the expenses can be curtailed; it will act as a reminder for everyone and help them improve their spending & saving habits.

Sticking to the plan

“Someone is sitting in the shade today because someone planted a tree a long time ago”.  – Warren Buffett Plant a seed and forget to water it regularly, it will die soon. Sticking to your set plans is a requisite if you wish to see it bearing sweet fruits. To be able to stick to your plans, it is also necessary that you set realistic goals.
A Financial goal that is neither too easy, nor too difficult to achieve. A realistic, reasonable goal will not disturb your routine expenses and will keep you determined to achieve your investment objective. As suggested earlier, put up your goals on a bulletin board, so you know how far you are in realizing them. You may as well install a spending /investment tracker on your mobile phone and keep a watch on all your expenses & investments.
To conclude, a strong commitment to save/invest consistently and an adequateemergency fund or insurance policies to take care of your financial crisis and support of your family is all that you require to attain a lifelong financial fitness.

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