Financial Planning for Good Living

Make hay while the sun shines

Financial Planning is most important for everyone. If you have properly learned to invest your funds you will reap the advantage when you are not able to earn and still want to have a good living style. This depends a lot on the stages of life and some techniques to help you save.

The stages of life and techniques of saving

(a)Value of money

Life is a natural process of growing up and earning money. The first stage of life is childhood. This is not the time to invest but one can certainly begin to learn to save.

Parents should be encouraged to give pocket money to the children and help them to understand the value of money. Ideally, children begin to understand that they can buy goods in the market with money at about 10 years of age

Benefit #1: Children learn the value of money and it becomes a habit by saving some pocket money.

(b)Savings from the first job

Children become adults and begin earning. In India, they usually begin earning by 23 years of age but in other parts of the world, they begin doing part-time jobs by 20 years of age. Assuming that they begin earning independently by the time they are 23 and they have got their first job. Proper savings should begin

The young people living independently have to spend on their rent, clothes, transport and entertainment. They should save 10% of their earnings.

Benefit #2:This will begin the flow of a fund in their lives

(c ) Increase in income and investments

The young people are stabilized in their jobs and there is an increase in their income. This is the time they should begin to understand money.

Now they should start by saving in a Savings Instalment Plan. Their savings should increase to 15–20% of their income. They must begin to plan for their future. Money has value with time in the future and the present. In the future money gets compounded and in the present it will be discounted. There is a future value and present value of money.

Benefit#3: Understanding the mechanics of ‘Time Value of Money’. Investments will be evaluated with future earnings and return on them and investment will be made accordingly.

(d) Accumulation

This is the time between 31 years of life to 50 years when you begin accumulating your investments. The lives of great people like Jeff Bezos, Mukesh Ambani, and others were made between 31 -50 years of life. This is the most active phase in one’s life.

Investments should be made through diversification of assets. The thumb rule is that all funds should not be invested in one type of asset but in different assets and help may be taken from financial planners to explain the avenues of investment.

Benefit#4 Fund becomes big and investments are made through the calculation of risk and return as well as future inflation into several avenues.

(e) Prosperity and Benevolence

The next phase of one’s life is prosperous. Money has been earned and a good life emerges. This is the time when you continue to take risks and make capital market investments. Since it is the stage of prosperity the person becomes benevolent towards society and family and also begins to prepare for retirement.

This is the last phase of active life. It is the time when the person should begin thinking of a good life and retirement. Since all is planned earlier, he begins to enjoy life to the maximum but continues to hold the investment.

Benefit#5: Retirement Planning has been done, enjoy your earnings and think of the distribution of the investments for yourself and for the family members.

In conclusion, I would like to find out from you

Do you save and invest? If so, follow the above pattern in your life to be contented and happy financially. It is said waste not, want not. During your active life, it is good to have fun and entertain your friends and accumulate many things. Never forget your future though, especially the time when you will not be able to earn and you would like a good standard of life. If you ‘make hay when the sun shines’, you will never regret it. So do your financial planning carefully. Do not think of the short term benefits but the long term financial returns in your life which will create a safe environment and good life for you and your family.