A person is said to be healthy if he is healthy in five areas – physical, mental, social, emotional and financial. These five facets of health are interlinked. Being financially healthy means being worry-free. Stress in one’s finances shows itself in the person’s physical, mental, emotional and even social wellbeing. On this World Health Day, make it a priority to work towards your financial health and wellbeing.
Health and happiness
Being happy is a prerequisite for optimal health. Contrary to popular sayings, we’ve observed from 13 years of financial coaching that happiness is linked in a big way to money. For most people it is the confidence of being able to provide a good education to their children, not having to compromise their lifestyle in retirement, and in addition, fulfilling dreams like a good house, car or traveling the world, for some.
All these goals require thorough planning. A financial target needs to be assigned to each goal considering your cashflows, time left and the order of priority. Suitable investments need to be identified. This process is usually followed by completing documentation. Finally, as an ongoing basis, progress needs to be monitored.
Tips for being financially stress-free:
# Create a rainy-day fund
Despite the best of planning and preparing, luck can sometimes rub the wrong way with a job loss or prolonged illness; the spouse may have to take a break for child bearing and rearing. Having a contingency fund eases the stress of such situations. Make a detailed cash flow statement listing down all expenses incurred monthly. Multiply that by 6. Contribute towards this corpus gradually by investing in a liquid fund and don’t dip into it for anything other than emergencies.
# Prepare a budget for savings, not expenses
Most of us can live on less than we think. The magic mantra here is to adopt a savings budget instead of the expense budget. Save adequately for the goals most important to you and spend the rest guilt free.
# Have adequate risk cover
Health insurance is a risk cover everyone ought to have, regardless of wealth level. With the cost of medical care sky rocketing by the day a single hospitalization is enough to leave a gaping hole in your savings kitty. For those with dependents, having a life cover is mandatory. The cover should be sufficient to take care of your dependents’ needs (and your liabilities, if any), until the dependents start to earn. Buy a pure term policy; traditional plans and ULIPs don’t do justice to the premiums paid and are in fact wealth drainers.
Why involve a financial planner?
A lot of otherwise smart and successful people flounder with finances because they lack the time and initiative to pay attention to them. This is especially true in urban settings where the demands of work life and commute can be taxing. Such people can greatly benefit by working with a committed financial coach.
A good financial planner will be much like a health coach who identifies your goals and values, prepares a regimen, charts out a good nutrition course and suggests habit changes. He will understand what your sense of life purpose is, what makes goals are most important to you and prepare a roadmap to meet each of them. He will counsel you for financial behavior change, encourage you stay on the track charted out and keep worry at bay.
Identifying a good financial coach
It can be challenging to choose a reliable financial planner with every other agent, distributor and bank relationship manager masquerading as a financial advisor, planner or wealth manager. Many folks tend to get carried away with brand names, especially of banks. Remember that most relationship managers are primarily sales people with targets for selling products.
So how do you select a good financial advisor? We believe a good guide would possess three traits:
i. Gathers data in a detailed and comprehensive manner and ensures he has understood the overall scenario well.
ii. Discusses risk with you and helps you form a realistic expectation of returns
iii. Does not stop with product and investment suggestions. Helps you stay on track by updating how you’re faring and suggests actions as and when required.
Wish you the very best of health, happiness and worry-free finances this World Health Day.
(By Amar Pandit, CFA, Founder & Chief Happiness Officer at HappynessFactory.in)