The first day at work- the first money earned -the happiness and achievement associated with the feeling cannot be expressed properly..However as time flies and responsibilities add up we all get into a grind where the cycle of earning and spending becomes a vicious one. If we do not have a proper plan up our sleeves, how so ever we may earn may not seem to be sufficient for the times to come.
We have already seen the Importance of goal setting in our previous blog. As in other aspects of our lives setting goals for a healthy financial life is of paramount importance. Most of us tend to give importance to how much we earn. However it is how much we save and what is our modus operandi in doing so that according to me is of immense importance.
Meaning thereby if we have proper goals and proper planning ahead of us we can enjoy peace of mind , and it would be easier to handle the various stages and challenges that are set forth for us.While making a strategy for our financial life certain things ought to be kept in mind.
Analysis of current financial situation:Before embarking upon the task of setting goals for a better financial future we need to sit down and take stock of our current financial situation.In doing so look at these following aspects:
- Current budget - Earning-Spending and Saving ratio.Before making plans in our personal finance we need to be aware of our present budget.
- Your current portfolio-Most of us do start saving as we start earning but on an average we do it in a random manner without any actual pan or strategy in place.Therefore we need to write down in one place all that we have saved, the instruments in which we have saved and there present value so that we can see where we need to continue and where we need to make changes.
Current Age: Our age is a very important factor that needs to be considered before setting realistic goals for a healthy financial life. For e.g.- The strategy to be adopted by a person who is 30 years old would be very different from a person who is 50 years old. Age of a person is a very important criteria as this is what enables us to see the time horizon available to achieve the different financial goals as per an individuals requirement. Also this determines the instruments in which an individuals investment should be based, for instance a 30 year old can have more investments in the equity market whereas a 50 year old nearing his retirement should be more cautious and have more investments and savings in debt instrumentalities.
Temperament : Our temperament is what also equally determines our modus operandi in choosing our saving and investment strategy.By temperament here we mean whether we are ready to take certain amount of risks in our financial planning or we are totally risk averse when it comes to do anything to do with our money.For instance a person who is ready and willing to take some amount of risks with his money should choose to invest in the equity market whereas a person who is totally risk averse should choose to invest in debt instruments such as bank fixed deposits or bonds etc. This coupled up with the time horizon available for realising each of your goals contribute and determine the strategy to be adopted for financial planning .
Liabilities: An important criteria that need to be considered before adopting a strategy for setting forth an effective and achievable financial plan in action is to determine and ascertain the present liabilities/responsibilities that we have . Liabilities may be in terms of number of people dependent upon us, the number of loans and mortgages that need to be repaid etc.For instance a 30 year old may have more liabilities than a 50 year old, therefore we need to consider and take into account this very important factor before setting and rolling out any financial strategy in action.
Categorise your Financial Goals: Different people have different financial goals. It will all depend upon our individual circumstances and choices.We need to break down out our financial goals to achieve clarity with regards to the plan to be adopted. Broad categories may include goals for your family: children, parents spouse, retirement planning, planning for paying off your debt. Whatever our goals are we need to categorise them with a time horizon associated with each of them so that we understand our priorities and chart out a feasible working plan for the same.
Many of our discontentment stem from lack of clear perspective with regards to adequate structure with regards to financial planning.If we have our financial life and goals in place we can concentrate on other important and enjoyable aspects of our lives.So go ahead and enjoy a blissful and healthy financial life!
Recommended Books:
Rich Dad's Cash flow Quadrant: by Robert T Kiyosaki
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