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| Get a head start |
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Rattan Chugh
ExpressMoney
Monday, July 24, 2006 at 1057 IST
As Prominent Philosopher William James said “ In the dim background of our mind
we know what we ought to be doing … but somehow we cannot start … every
moment we expect the spell to break … but it does continue, pulse after pulse …
and we float with it.” |
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The choice to float along or take charge of your financial health rests with you.
Cornerstone collaborates with you to develop a holistic plan to help you achieve your short-, medium- and
long-term financial objectives. |
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| A professional advisor works as your partner to help you achieve your personal finance goals. |
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Suresh is the typical financial expert, who dishes out advice at the drop of a hat, but who rarely uses it
himself. It isn't as if he doubts his analytical abilities. He just loves the good life and keeps a tab on every
swanky car or electronic gizmo to hit the market, and doesn't forget that annual vacation to exotic locales.
About financial planning? Yes it's critical, but umm…it's a big drag to worry about old age, my daughter's
wedding, etc, right now when I'm busy having fun. But it's on my mind, and I'll do it one day.
Isn't there a little bit of Suresh in each of us? How easily we succumb to the power of loans and credit cards
to 'make the most' of our green years! In the process we fail to take stock of our financial health.
As prominent philosopher William James said, “In the dim background of our mind we know what we ought
to be doing … but somehow we cannot start every moment we expect the spell to break but it does
continue… and we float with it.”
The choice to float along or take charge of your financial health rests with you. It may sound overbearing
but it is all about making a start and taking that first step. The sooner you start, the better your control
over your financial health. |
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| Get a coach |
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It isn't all that difficult, really. I believe the key decision is to engage a trusted financial advisor. Treat him as
a coach. Remember, even the brightest require coaching. As a coach guides able sportsmen to achieve
superior performance, a good financial advisor collaborates with you to develop a holistic plan to help you
achieve your short-, medium- and long-term financial objectives. He becomes a resource in managing your
plan and taking any mid-course corrections.
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| Three-step approach |
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Financial health, like all other aspects of life, involves the following steps:
Being. List all the things you want to achieve in life, without allowing your current situation to be a
constraint. Be as specific as possible. For example, you may want to buy a house worth Rs 30 lakh by 2010,
or save Rs 5 lakh in current value for your child's education by 2015 or draw pension at age 60. Aim high!
The big danger we face is not missing a target placed too high, but being complacent after reaching one set
too low.
Doing. Get a fix on what you have to do to achieve the above results. Work with your advisor to understand
your savings needs and arrive at a level of return that is necessary. This will help you determine the level of
risk involved in meeting your goals and develop a suitable asset-allocation strategy. Also, assess your
insurance requirements.
Develop an elaborate financial plan based on the above that entails aspects like monthly investments, timely
payment of EMIs and insurance premium, tax planning, risk management, diversification and liquidity
requirements.
Having. Define key milestones and tracking mechanisms. Review your plan with your advisor every year to
assess your progress for every financial objective, the performance of your investment against the relevant
benchmarks and your tax liabilities. Agree on any further actions that may be required after the review. You
may have to adjust your asset allocation, review the amount of monthly investment, or adjust the portfolio.
Ask your financial advisor for a comprehensive portfolio statement along with your net worth every month.
Maintain a file of details and documents such as insurance policy, folio numbers and maturity date. Let a key
member of your family (or your nominee) know about it. |
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| Ignore the noise |
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Don't get taken in by stories of how your friend made a killing in stocks or how your cousin made a crore in
the property market. Chances are, they wouldn't have told you about the times when their picks turned into
deadwood. To be successful, you need to stick to your monthly investment action plan and resist any
temptation to let other exciting yet not so important expenses sway you. |
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