For a lot of people, money is an extremely emotive subject. A lot of our beliefs, values and motivations are often deep-rooted in our finances, making our relationship with money a little tricky. Almost everyone, no matter what the level of their income or the degree of pre-planning is, experiences some level of anxiety or pressure of meeting their goals. This financial stress is something that hinders the pursuit of our goals and, thus, our happiness.
As a matter of fact, we all want to invest in top performing funds, creating an all-star portfolio but how many of us have actually succeed in doing so? Beating unrealistic benchmarks isn’t a financial plan. It is only when you invest in something that truly matters to you do you stick to the plan and more importantly, experience true happiness. Over the last 12 years we have been helping over 500 families and most of them just want to know one thing, “Am I doing ok?” When one takes the product first approach, it doesn’t help families to answer this simple question.
Everyone has the capacity to achieve financial freedom but that’s possible only if they spend some time on planning their finances in the right way.
A good place to start is by answering these five simple question which will ensure higher clarity during the planning process.
# How much can I reasonably save?
# What is the rate of return I will get?
# How much money do I need?
# When will I need this money?
# What is it that I want to leave behind?
While only five questions might seem insufficient to build your entire financial future upon, they can be thought of as five separate choices that provide the necessary balance to your financial plan.
In addition to answering these questions truthfully, there are additional measures that you can undertake to ensure that you do actually end up with decreased anxiety with respect to your finances.
# Start with defining your vision, your financial goals and let these act as the guiding force of your actions.
# Avoid getting confused by every new plan that gets introduced in the market. Altering one’s investments strategy based on the introduction of a new fund into the market may do more harm than good. Thus, sticking to the plan is more important than creating a new one.
# Resolve to say ‘NO’ to financial pornography in the form of newsletters and notifications about new funds, innovations, experiences being offered by anyone. All these do is confuse you and lead you away from your decided path.
# Maintain a Savings Budget as opposed to an Expense Budget. This ensures that you can save but also indulge at the same time. The idea is to set a savings target of 15-25% of one’s gross annual income in a mental account called ‘My Goals’.
# Safeguarding assets is extremely important. Thus, creating a will is the best thing you can do for yourself and your future generations because it will ensure that your estate gets distributed according to your wishes.
# In your busy lifestyle, do not ignore your family, friends and more importantly, your own health. Health is an individual’s greatest wealth and must be concentrated on with a lot of effort.
# As Socrates said, the key to human self-advancement is knowing oneself. Thus, understanding your emotions and behavioural biases can help avoid costly mistakes.
# Your wealth should be built in the shape of a pyramid with a solid base of contingency funds, relevant insurances (to transfer all risks), limited liabilities and investments.
While money might not be able to buy happiness, getting a grip on one’s finances and knowing where one stands with respect to achieving their goals provides one with the most valuable assets in the world – to gain freedom from financial worries, to live worry free, and achieve YOUR version of happiness.
As Carl Richards rightly put it, “Financial decisions aren’t about getting rich. They’re about getting what you want—getting Happy.”
(By Amar Pandit, Founder and Chief Happiness Officer at HappynessFactory.in)