Everybody saves, just as, everybody eats. The big question is "Do you eat right?" or "Do you save right?" While what you eat will reflect on how you look and feel. Similarly, the way you manage your finances (from now onwards), will reflect on how secure you will be, financially, as long as you live.
In our (fairly complicated) lives where the use of jargons tend to put off the mild-mannered and the easy going, "Financial Planning" or FP, is an addition to the jargon overload. Before you turn this page without reading it fully, let me assure you it is no rocket-science.
FP is the art and science of managing finances in a manner, so that you always have sufficient money on hand to take care of your needs, at present and in the future. While in the present context it will suffice to say that your income should always exceed your expenses. Post-retirement, the accumulated corpus should be sufficient (amount wise) and should be invested carefully in order to generate a regular income to meet your needs. All of this has to be done in a manner so that an unfortunate twist in the tale - unforeseen expense, loss of income, damage to assets, or an increase in liabilities; will not leave you scarred.
To begin with you need to ask yourself the right questions -
a. Am I saving enough?
b. Am I spending right?
c. How can I enhance my income?
d. What are the various risks I face?
e. What is my ability to meet a risk without succumbing to it?
f. Are my investments and savings liquid (enough) to meet any emergency need?
g. Are they suitably diversified, so that they are not hit by any single event-risk, all at the same time?
h. Are my investments and savings generating enough returns to beat inflation?
If your answer to all these questions (in reasonable detail) leaves you satisfied, then, you are most likely to be up-to-date on your financial plan. In case, you are not, then you need to work on them and maybe a Financial Planner will be able to ease your worries.
A simple list of dos and do'ts will be just right as a starting point -
a. Track every rupee you earn and spend. Also teach it to your kids, it will serve them well for a lifetime.
b. Make a complete inventory of all your assets - property, MFs, shares, bonds, FDs, Insurance policies, gold, jewelry, etc. whatever you own and wherever they may be located.
c. Revisit the questions listed in the first section.
d. Keep going back & forth, working on all the small improvements that you can make. List down the plan of action and set yourself a date by which you will have them re-worked.
e. After doing this, if you feel you need professional help seek out an expert.
f. If you resort to action 'e' (above), without working on the steps that come before it, you will make a big mistake - please avoid it.
It's a common practice to have savings in the form of stocks, MFs, insurance, FDs, etc. done over a period of time without any method or plan. It is recommended that one reviews and integrates all assets rather than retain them in bits and pieces, as this will lead to sub-optimal results (jargon again, but an easy one!).
A Financial Planning exercise with the help of a professional will help you realise the best results only when you are prepared for it!
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