Sensex jumps, ‘aam aadmi’ cries! Why should there be such a conflicting situation? The reason perhaps is that the basics of governance are not right. Otherwise the progress of nation and welfare of all its citizens go with each other. But this is the larger issue!
After you start earning for yourself/your family, do follow the following basics of personal finance to ensure financial discipline and mental peace in your family life. These may also be called as ‘financial commonsense’.
1) You must save for future
Saving is actually the base of anything you financially plan for future. Contingencies, future goals or obligations for family and the rising costs, all make a strong point for saving seriously for future. As the world famous investor Warren Buffet says, “Do not save what is left after spending, but spend what is left after saving”.
2) Your family be financially secured sufficiently
Nothing is certain in life, not even our life itself! Do you, as breadwinner, really love your family? If yes, make it financially secured during your life and after, by way of proper life and health insurances.
3) Investments be directed towards goals, short term or long term
Goal-based investment is the best way of investing, which is nourished by proper asset allocation and diversification over period and assets.
4) Tax planning be subordinate to investment planning
What is commonly observed is that retail investments are mostly made at the end of a financial year just to save tax under Sec 80C of the IT Act. This is the most common financial blunder made by citizens after the mistake of treating insurance as investment vehicle.
5) Prioritize your retirement planning
Retirement life is one long span where active income stops but expenses rise with the adverse effect of age-bound health problems and the inflation. It requires enormous corpus if existing lifestyle is to be maintained all along the retirement years, which can be easily achieved by properly planning the investments for it and starting early.
6) Review and re-balance your investment portfolio periodically
One thing investors must not forget is the dynamism of time. The changes occurring in life or in the economic environment require the existing portfolio to be reviewed and re-balanced periodically at least once a year.
7) Ensure nominations and have your ‘Will’ in place
This is to be sure that your dependents receive the deposits and assets, achieved with your hard work, without delay and legal hassles and as per your wishes after your death.
Just as no bungalow can be built in air, financial freedom can be achieved only with the financial basics in place.
Do you agree? Please share your thoughts in the comments section below.
(Photo Courtesy: Generation Bass)
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