Are you Financially Fit?

In the monsoon season it is very common to have fever, chills, muscle aches, cough, congestion, running nose, headaches etc. Even some times people get dengue and malaria also due to change in weather conditions and high mosquito breeding. To avoid these problems we take certain precautions like not getting wet, drinking boiled water, avoiding outside/open food, keeping our surrounding clean etc.

But what about financial health, did we ever bother to check whether we are financially healthy?

As we need to be physically healthy, being financially healthy is equally important. Financial health determines how our future life will be, will it be comfortable and tension free or otherwise.

Our overall financial health comprises of many elements, like maintaining budget and living within it, spending within budgets, paying debts on time to build a good credit score, have proper defined financial goals be it short term or long term, investing properly etc.

So how should we maintain proper financial health and how to find out the symptoms of bad financial health? Let’s understand the points which can help us to be more financially healthy.

1. Don’t know where the Money is

In the current digital word spending/transferring money is very easy and fast. We make payments through Credit/Debit cards, online transfer through mobile apps and so on. In this process we forgot to keep control where our money is and how much actually is in our different accounts. Sometime this results into paying various charges/fees which can be avoided.

It is always better to keep a regular check on various transactions and balances of various online/offline accounts. Further we should be vigilant about the charges and fees levied so as to avoid them.

We should keep our bank passbook updated regularly or have the latest statements with us. It would be better to maintain our bank accounts in ms excel with us so as to review cash flows and have control on them.

2. Buying anything and everything by Credit Card

Many of us get into habit of using credit cards for buying everything. This sometimes leads to buying those items which are actually not required. As we don’t have to pay the money immediately we don’t feel the pinch of it. But remember nothing comes free and if we don’t pay our credit card dues on time there is a very high interest rate (36-48% annual) as well as the penalties.

By spending unnecessarily we will not be saving enough for our more vital future financial goals and perhaps drowning in debt.

We need to control our spending habits we are spending beyond our budgets by cutting down unnecessary expenses like dining out, buying expensive gadgets etc. The other option could be to increase our income by doing some part time job etc. However controlling our spending habit will still remain crucial.

3. No/Little Savings

Many people believe in today without bothering for tomorrow. They have very little savings although they are working for quite some time. We call it a bad savings habit. Those who have this habit should be careful as this can be just a start to a big financial crisis of the future. This can lead to the person in such a situation that he may be left with no money to meet vital financial goals, one of them is retirement.

To be financially healthy savings is the first and most important step. We should have habit of saving first then spending. Further we need to invest the money with a proper strategy so that it can accomplish our short-term, medium-term, and long-term financial goals.

4. Not planned for Emergency

The world is full of uncertainties and nobody knows about future. Emergencies such as hospitalization of family members, loss of job, etc. can knock the door anytime, so it is very important to plan for something which we never planned for. If we do not have emergency fund and proper insurance cover, it is a sign that we are not prepared for the worse in life.

We can keep our 6-12 months of regular living expenses, including EMIs as emergency Fund which can be kept in liquid funds so that it can be used if the situation arises. Financial security at those difficult times gives us more courage and strength to come out of it graciously.

5. Poor Credit Score

Some people have habits of using credit cards carelessly like buying items in EMI by credit card, paying minimum dues of credits cards or taking one loan to pay of the other loans. These habits lend a person into vicious circle of debt trap and a symptom of bad financial health.

This leads to poor credit score. Currently all lenders check credit scores and consider it as one of the most important deciding factors for sanctioning loans. A low credit score reflects bad credit worthiness and behaviour, and reduces the chance of a getting a loan at the best interest rate when a person needs it the most.

If someone is facing these issues then probably he need professional guidance to get out of it as soon as possible.

As we need to be physically fit to enjoy the life, financial fitness is equally important for a stressfree life. If we have any symptoms or poor financial health we need professional guidance to take corrective measures before it is too late.

Investments Sahi Hai Par Financial Advisor Jaruri Hai

This week many of us have paid respects to our teachers on the occasion of teacher’s day. Most of us will agree that teachers are very important in everyone’s life. Many of us will also agree that whatever we are today, our teachers have played a great role on this. Even in sports also every player thanks his/her coach after winning. Similarly our parents and elders have advised us on various stages of our lives since our childhood and many people also have gurus or mentors who have given a direction to their lives.

In this age of internet and especially the Google, anything and everything is available on a click of a button. So whether we want to buy something or invest or even want to cure for a disease it is just a click away. But is it really workable; think about this—can we cure ourselves by googling except may be a basic problem like cold and will that be right? Similarly, for investing, while we may have an idea about the type of investment to own, most of us lack insight and expertise.

Let us understand the reasons why we should have financial advisors:

1.    Investment products are becoming more dynamic and complex. Two decades back we use to have few products like Bank FDs, PPF and Post Office Saving products etc. That time the investment decision revolved mainly around comfort with the bank, rate of return and tenor of the investment. However, now there are so many options that selecting the right option itself is a tedious job. For example in mutual funds there are equity-Large, Multicap , Mid cap, small caps, thematic, tax savings etc, hybrid, dynamic asset allocation, arbitrage funds, debt funds- liquid, duration , credit risk funds etc. Further there are different PMS products, derivatives, direct equity, insurance, Alternate Investment Funds etc. So what is right for one person may not be suitable for the other. Just by googling it may not give you what actually fits in your specific requirements.

2.   Another important point which we should always keep in mind is that investing is not just about making money but also about avoiding mistakes. While taking investment decisions we often get influenced by emotions, past experiences, advice from friends/relatives and our own attitudes etc. During negative markets, most common cognitive bias of investors are loss aversion, panic sell, and herd mentality. Many of us have heard how people were crazy in equity market investing during 2007 and early 2008 and then the panic sale in late 2008. People have invested in real estate market in 2010-13 with the hope of 2005-10 kind of bull return but actually landed up in no return assets. An advisor can actually help the investors in those times to see beyond the current hype and help him to take a rational decision.

3.  We should understand that investment is not one time decision but a lifelong process and is different for every individual. A person stars investing when he/she starts working i.e. generally in mid 20s, and keeps on investing till he stops working i.e. retirement. As a person keeps on investing for his entire working life similarly he needs constant advice and different strategies for different life-stages. Every individual have different income/expenses/requirements, risk appetite and cash flows and accordingly his investing requirements also differ and needs to be customized base on his own specific need rather than a general solution.

4.      A Financial advisor not just helps an investor to take right decision about where to invest, when to invest, how much to invest and how long to invest but also performs various other things. Like keeping track of performance, analysing the funds doing asset allocation and rebalancing, risk profiling etc. He also helps in providing consolidated picture of investments, taxation and capital gain calculations and to keep the record in proper and systematic way.

Every profession needs its own expertise and no one other understands their roles & responsibilities better than the one who is in charge of the respective role. Hence It will always be better if we spent more of our time in our primary roles rather than getting into some serious trouble by trying to save some money.

And lastly remember the youdh of Manabharata was won by Pandavs despite Kauravs have the biggest army and great warriors and this happen because they have the great advisor Shri Krishna.