Life is not linear and finances are no different, stability
is one thing we try to pursue and achieve in all aspects of our life including
money management.
Money management is about managing what you can manage and
trying to minimize the losses arising from something that is beyond your
control.
This could be anything from recession to a bank collapse to
something personal like a job loss, business failure, health crisis, etc.
As much as the aforementioned crises could be attributed to
being out of control, working on having your savings and investments well
sorted to minimizing losses arising out of such crisis is still within our
control.
Basic Planning
Basic planning would involve understanding your inflows and
outflows, the difference between needs and wants.
How you prioritize your spending is the fulcrum on which
your future money related issues can be predicted.
It is as simple as being aware that we all need to have an
emergency fund, we need to save and invest first and spend later and not being easily
influenced as far as spending is concerned.
You save for an emergency fund but you invest for growth,
inflation is a lesson better learnt than taught.
If you have an emergency fund then you would not need to
touch your investments in case of a crisis like say a job loss, basic planning
may seem boring but its impact cannot be understated.
It is better to have it and not need it than to need it and
not have it.
Financial goals
Segregate your financial goals into different time periods
and their priority.
For emergency and short term goals, equity must be avoided
at all costs.
For long term goals, investments and products that have the
ability to beat inflation consistently should be preferred.
Even financial plan or product carries with itself certain
risks and rewards, what works for one may not work for another and therefore it
is better to employ the services of a professional to cater to that.
The personal in Personal
Finance carries more weight than the Finance.
Segregating your financial goals to a certain extent gives
you a sense of direction, no wind is favourable to the sailor unaware of his
destination.
Regulations
The first point to look at prior to investing is whether the
product is regulated or not.
When a product is regulated by an act or law it means you
have a redressal system to call upon in case things go south.
If not then the chances of recovering your hard earned money
in case of say something like fraud is very bleak.
Off late several products and schemes have lured in gullible
investors with the bait of high returns but are not regulated.
There is a difference of day and night between greed and
growth, your aim when investing should be growth and not greed.
Rules
Every investment product has a set of rules that applies
once you invest in it.
For eg. With mutual funds you have long term capital gains
tax and short term capital gains tax.
A tax saving mutual fund scheme comes with a lock in period
of 3 years.
It is important you apprise yourself of the rules that a
certain investment product has to comply with and the ones that apply to you,
prior to investing so as to avoid any unforeseen events.
Being financially
educated can help you avoid many unnecessary pitfalls.
In an ever changing
world it is important to keep yourself constantly updated with any new changes
that may arise from time to time.
Start early with what
you have because proper financial management not only helps with long term
wealth creation but also helps you in leading a stress free life, at least as
far as finances are concerned.
For portfolio enquiries, email us with your doubts at info@themutualfundguide.com
