This festival of Vijayadashami i.e Dussehra signifies the victory of Good over Evil. Since childhood we have been told the stories of Greed, Anger, Evil attentions of Ravan as well as Goddess Durga’s victory over Mahishasura.
Knowingly as well as unknowingly, we all make mistakes in our day to day lives, this festival is an apt occassion to review, refine and replan. When it comes to Finances which makes an integral as well as most important part of our whole life cycle, not one or two we make thousands of mistakes. This Dussehra, let this be the occassion to find out these common mistakes that dent our most crucial goals of life.
Before Dusshera, we celebrate 9 day festival of Navratri by fasting & giving up on our favourite meals. This process needs restraint and an ability to not give in to the temptations. Similarly Financial Planning can be effective only by making small sacrifices that are very important for our future security. Planning for Financial Security is imperative & discipline is the only way to achieve it.
10 most common mistakes that we need to overcome this Dussehra
Life Goals – Life & Death is truth & everything in between is a Reality, Child Schooling, Their Higher Education, Weddings in Family, Your Dream Home, Adequate Retirement Fund all are important Milestones sandwiched between Brith & Death, Happiest Families are the ones who create a calender of events with timelines attached to each of goal.
Saving – Seed to Investing is Saving, in our day to lives there are many ways that we can practice Saving. How about using microwave to bake your own fresh bread at home. Rs. 500/PM saving could be worth 1.80 Lakh during service time. Small Savings in Kichen, Toiletries, Stationary, CSD Bills, Soft Drinks can add to lakhs of rupees.
Discipline – Investing is all about non negotiable discipline. You need to sacrifice some luxuries, delay few buying decisions, compromise some holidays to create wealth. When I say compromise, it does not mean giving up but one movie outing in a month than three is what discipline is all about.
Inflation – Something that has power to spoil your party is Inflation, one must consider this very seriously & plan with futuristic approach. What is available today at 10 lakh might require 40 lakh in next 12-15 years down the line. Your father bought you a cycle for little less than ₹1000 & you spent ₹10000 on buying a cycle for your daughter is what Inflation will do. Achieving Life Goals & period after your Retirement will need a lot of money, be wise enough to read the future & plan accordingly as per time value of money.
Needs n Wants – They look the same but actually they are miles apart and have the capacity to create a total mess up with our financial eco system. While need may be a 5 seater car for a family of 4 (two children below 5 Years). Buying a SUV worth ₹ 20 lakh would be a Want but actually you needed a good car with high safety features costing around ₹10-12 lakh. Same things happen while shopping as well, some time we get lured to 50% discounts or 1 + 1 offers, ask yourself before every buying event “Do I need it for Sure”
Health & Term Insurance – Life can throw many unpleasant surprises, it’s always advised to be prepared for the worse. Your term insurance should be worth 10 times of your annual income & Health Insurance Top up plan worth ₹50 Lakh should be a bare minimum necessity. Believe me they don’t cost much.
Documentation – All your Savings, Investments, Financial Transactions should be backed with proper documentation. You must periodically review all your documents and keep a track of Proper Contact details like Mobile, Email, Nomination, Bank Details etc. God forbid if something goes wrong in life, your family should not suffer because of documentation errors.
Competent Financial Advisor – if we rely on competent Doctors, Architects, prefer professional legal advice at times, identifying a Professional Financial Advisor is of utmost important in your Financial Planning exercise. A good financial advisor is like a guide who can hand hold you at the times of market ups & downs.
Portfolio Divesrification – Times have changed and choosing right Investment options is need of the hour. There should be no hesitation in choosing modern options available. Keep yourself updated with latest in Equities, Mutual Funds, PMS, AIFs. Not putting all eggs in one basket should be the strategy, a right mix of Real Estate, Gold Debt, Equities should be practiced . 100 minus your current age must be your share of equities investments.
Loans – As much possible avoid loans of all sorts, taking a loan means you pay double the amount to realise your dream. A Home loan of 50 lakh if repayed in 20 years is, 92.66 lakh. One home loan is okay but go as per your actual need. Even Credit Cards should be avoided beyond a point, if you are not able to manage payment cycles well, you end up paying 20 -30% interest on balance payments.
These ten points may not be actually 10 evils but they remain the basic ten steps of your Wealth Building exercise. Practice them well and educate your young children to follow your foot steps. In money management, knowing right things and your total discipline to follow the basics is what matters the most.
May this Vijayadashami be start of your Vijay yatra to Financial Freedom. Stay Happy & Healthy and remain disciplined with your finances.
Kamal K Sharma is an Author & a Financial Professional, he is visiting faculty to BSE (Bombay Stock Exchange) Institutes & an Author to the bestseller The Piggy Bank Billionaire book.
