Financial stability and ways to improve it

March 30, 2021 7:18 PM

While growing inflation and rising costs of living are key factors, it’s important to realise that financial commitments evolve as we progress in our lives, and our diverse needs such as higher education, leisure, wedding, child-care, starting one’s own venture or even early retirement require financial stability.

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The pandemic is a reminder that the need to focus on financial stability is more pressing now than ever before. The challenging year that went by has made people rethink ways to be better prepared for emergencies. Financial stability should be a key milestone for all individuals. It is crucial that one is able to meet all life goals comfortably without any compromises. A financial shield will not only help meet life goals but will also guard individuals and their families against any unforeseen circumstances. Given the ongoing uncertainties, a robust outlook towards financial stability will be instrumental in navigating challenging times.

Balanced financial planning key to financial stability

Over the years, the consciousness towards financial planning has been on the rise as it is a key driver of financial stability. For a long, a majority of Indians usually kept their savings intact in bank accounts or invested in physical assets such as gold and real estate. Lately, the growing awareness about different investment avenues and the smart ways of digital investments has enabled people to invest in stocks, mutual funds, and other market-related avenues for better returns. A balanced portfolio is one that proportionately distributes assets in growth and savings instruments via investments in equities, and fixed income, shares of stocks and risk management products to optimize returns. Such an asset allocation strategy is key to financial stability as it factors in the benefits of each investment instrument.

Financial stability to meet different life stage goals

While growing inflation and rising costs of living are key factors, it’s important to realise that financial commitments evolve as we progress in our lives, and our diverse needs such as higher education, leisure, wedding, child-care, starting one’s own venture or even early retirement require financial stability.

As a first step, it is essential to have clear and defined financial goals for different life stages. Take time out each year to evaluate all your investments and analyse which are the ones bringing in maximum promise for the long term. Your goals will evolve with time and you will need to alter your planning approach for different stages of your life. Depending upon the financial needs such as your child’s education or starting your own venture, these goals will vary from wealth generation to risk mitigation and short term returns to building a retirement corpus.

Simple steps towards strengthening financial stability

Irrespective of where you are in your financial lifecycle, here are some tips that can help you get a better hold of your finances and achieve better stability:

  • Start early and develop a habit of saving a part of your income consistently every month
  • Make a monthly budget by evaluating all your expenses and follow a disciplined approach towards spending. Stick to the budget. It is the best way to ensure bills are paid and savings are on track
  • Avail credit solutions keeping in mind your repayment capacity. Regularly monitor your credit reports to be aware of your financial health
  • Use your credit cards wisely and ensure payments are done on time
  • Buy assets that generate income and focus on investments at attractive prices that are likely to appreciate over time
  • Ensure that your portfolio is balanced with the best asset allocation approach that suits your financial objectives
  • Prepare a contingency fund outside of your regular savings for unforeseen circumstances, ensuring that savings are never dented
  • Maintain a good credit score. It will help avail the best credit options at every life stage

People often find it tough to take the first step towards managing their finances. As the famous saying goes, ‘The secret to getting ahead is getting started.’ Today, with technology interventions, it is possible to automate regular payments and set notifications to avoid any late charges. These simple steps can go a long way in future-proofing individuals and improving their financing standing. The last year has taught many to be adaptable and forward-looking. It is time to approach money management holistically from a financial stability point of view to get healthy and sustained returns from a short to long term horizon.

by, Navin Chandani, MD & CEO, CRIF Highmark

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