A good financial plan can put back your financial life on track and help you achieve your financial goals
Recently, I met a friend who was not enthusiastic about taking financial advice. This surprised me as most people are atleast interested in their financial affairs. I came to know that he was interested in having more control over his finances rather than relying on other’s advice. He had a bad experience with bank representatives and agents. and was left with useless portfolio and products.
He searched online and came upon financial advisors who either asked for fees upfront or those who had a commission-linked model. Logically, fee-only model makes sense as advisors do not have vested interest in selling you products. At least, there is no conflict of interest. I recommend previously how goal-based investment helps an individual in planning investment.
This friend was saving not according to any goals but according to a situation. If he had saved some money then he would invest in whatever he felt would give him more return. His saving was not regular but depended on his convenience. He had saved some for tax purposes without knowing if indeed it saved any taxes or in some other investment product which was offering more return at that time.
In goal-based planning, an individual can plan his savings depending on his goals. He clearly has an idea what amount would be required and at what time that amount would be required. It was not haphazard saving. It was not about beating market returns at that time.
When he sat down to plan according to goal-based investing, he was in for a shock. He realised how badly he had invested. There was neither a goal nor any planning in investing. He now knew what needed to be done. Tax saving was just one aspect of financial planning. There were short-term, medium-term and long-term goals too like children’s education and health care, their marriage, his retirement and his spouse’s wellbeing after he was gone. All these goals were not included in his initial financial planning.
He needed a reality check and now he has a more realistic view of his personal and life goals. The credit goes to his financial planning. Now he can sleep peacefully knowing he has control over his planning and if he needs money, he can have it. Any insecurities he had has been taken care of by his goal-based planning. By trying to go for wealth creation, he wasted lots of time instead of trying to invest according to his goals. Remember, a good financial plan can put back your financial life on track and help you achieve your financial goals.
The writer is director, Tradebulls Securities