World Financial Planning Day: 5 Resolutions You Should Make
A good Financial Plan pretty much begins with covering your bases
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Did you know that yesterday (4th October) was the first ever "World Financial Planning Day"? Launched by the FPSB (Financial Planning Standards Board) this year in association with its member organizations worldwide, #WFPD17 was a landmark event in the history of Financial Planning worldwide.
An announcement from the FPSB said: "FPSB has launched World Financial Planning Day as part of our commitment to support consumers in achieving their financial and life goals and to increase consumers' level of financial literacy and capability"
On the occasion, thousands of CFP (Certified Financial Planner) professionals worldwide conducted programs to promote a better understanding of financial planning topics - including debt management; preparing for an unexpected financial emergency; home ownership; building savings; investment planning; and preparing for retirement.
A 2015 global survey commissioned by the FPSB had discovered that Just 22 percent of consumers feel strongly confident that they will achieve their financial goals, with only 17 per cent believing strongly in their financial knowledge, and 19 percent feeling they are successful at sticking to their financial strategies.
In many ways, these inferences run counter to the fact that we Indians are a nation of savers - putting away, on average, close to 30 per cent of our GDP into savings instruments each year. The missing element in the picture for most of us, is a robust Financial Plan to help streamline and structure these savings properly.
To mark the occasion of #WFPD17, here are 5 simple resolutions that you, as a retail investor, could make.
Ctrl+Alt+Del your expensive debt
Stuck on the hamster wheel of debt repayment? Personal loans, impulse purchases on your credit cards and "quick" EMI's could, over a period, take your personal finances to the edge of the proverbial cliff. Restructure your personal debt by prioritizing your repayments over lifestyle purchases for as long as it takes. If you can borrow a lump sum, interest free, from a caring family member - do so without delay, and use it to clear out expensive debts.
Organize and Declutter
Portfolio scattered over more investments than you can count on your fingers and toes? This is an all too common tendency for individuals who tend to 'buy' investment plans rather than make investments in a well-planned, top down manner (starting with risk profiling, moving on to asset allocation and then finally the selection of financial instruments). This #WFPD17, get all your records together and junk the worthless investments after consulting with a Financial Planner.
Draw up a Goal Plan
Are you making your savings in an ad hoc manner? This #WFPD17, draw up a simple roadmap of the inflation-adjusted value of your future goals - such as your child's education/marriage and your own retirement. Work this number backwards and start diverting your monthly savings to these goals. Select the risk profile of your asset class based on the time remaining to your goal, and nothing else.
While you don't need to become a master of all things personal finance, you should aim to build at least a cursory level of awareness of what's going on in the global and local financial markets, and of the nuances of the various financial products available today. Follow one or two personal finance blogs that aim to de-jargonize key issues related to your money. Doing this will ensure that unscrupulous sales people do not take you for a ride.
Cover your Risks Adequately
It's quite an irony that for a nation of prolific life insurance buyers, most of us do not have our risks covered adequately. An appropriate sum of Health Insurance, along with a sizeable Term Plan which has a Sum Assured of at least ten times your annual income, and a very good track record of settling claims, are necessary. Over and above that, you may want to consider things like critical illness plans, personal accident plans or cancer insurance, if your lifestyle and family history make you susceptible to related risks. A good Financial Plan pretty much begins with covering your bases.
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