This may sound like a stupid question. Don’t we all need a lot of money? And since we need a lot of money, shouldn’t we continue doing what we have been doing all our life. You know, do more of the same, do the same routine, go do the same job, do the same commute etc. Spend those countless hours. Stay in the rut.Here is the financial plan for you while doing mutual funds investment,stock markets and other.Investing in Mutual funds is the best platform to Invest with low risk.
Why am I painting this bleak picture? The hard truth is that most people do NOT know what they are working for. There is no financial plan. What they are really working for? And how much they are in hard numbers. Without this clearly in the mind, a person will remain in the rut.
Doing the Numbers
Once you know what you need (i.e financial goals), then it is possible to work towards them with a clear plan. The standard examples are:
- buying a car
- buying a house (or making its down-payment)
- child’s higher education
- child’s marriage and
- THE retirement corpus. Retirement is important because you wouldn’t have any income to fall back on. So it is mighty important to save for it and also grow your savings smartly.
Financial Plan may get rid off all problems related to earn more money
Putting a number to each goal can be done realistically. But make sure you follow the mantras mentioned below in ‘Three important things’. Most ‘assets’ have a price tag and you can decide which one to go for. Future goals like children’s education can be estimated basis today’s cost; eg: an MBA for your daughter 10 years from now could today’s cost + an annual education inflation of say 11%. Retirement planning is trickier but there are ways to bell that cat too! If not anything just assume 30 times your current annual expenses.
Working for the Numbers
If you are clear about most of these numbers, then you are armed with a plan. Falling short of the numbers? no problem. Increase your savings. Or fine tune which mutual funds to invest in, so that the goals are met.
Another important way to make up the numbers, is to increase your income. That is easier said than done. But once you have the clarity on how much more you make (eg: earn another 30% extra per year), it becomes better. Here are some ways:
- You can work harder.
- Learn more skills that can increase your attractiveness in the market.
- Try to create additional streams of income. Do some freelancing?
- Take up hobbies that can earn you some. Examples are blogging, photography.
- Start a business!
Three important things
- Be Honest to Yourself: It is important to honestly estimate the numbers. Then you can work on them, without burning yourself out.
- Need vs Greed: Is that item really a need? Or is it really greed? Am I doing something to show off to the next door neighbour? Is that expensive car something that will be joy for a few days and later things look the same. It is said, “Too often people buy things that they don’t like, with money they don’t have, to impress people that they don’t like.” Isn’t that an utter waste of time and money?”
- Avoid Debt: That brings up another major point, borrowing and debt (loans). It is a big topic in itself. But in brief: don’t pay others before paying yourself. And every rupee that you earn should first meet your financial goals. If this means a slightly scaled down lifestyle, then so be it.Never ever take a loan to buy a depreciating asset (like a car). Really want that fancy car? Slog for it and then think if it is really worth it. That is far better than paying a monthly EMI that eventually wreaks your financial future.
Working Hard & Saving Alone is Not Enough
All this working your butt off and saving diligently is fine. But if you do not invest smartly then you may still fall short of the numbers. Have a good financial plan for it.Don’t over think this. Simply manage your regular savings and ensure that the remainder is put into the right funds. Mutual Funds are an excellent way to do this.
The other thing is to ensure that you invest in the right funds and through the right channel. Keeping investment costs low: fees, commissions etc is very important. Build a portfolio that keeps risks low in general. It should be personalized to your investment style and risk taking capability.
Conclusion : Mutual Funds Investment
To sum up, defining your investment goals gives you clarity to work towards them in a time-bound manner. Not defining them means that any amount of money won’t be enough for you. If you keep your needs manageable, save regularly and invest wisely, you will end up as a very wealthy person indeed.