Despite being most important, health and wealth remain the most ignored aspects of our lives. We don’t pay attention to them until an emergency wakes us up. The good old phrase hold true – A stitch in time saves nine. Being proactive in managing your personal finances can be the difference between your success and failure. What should be the “Trigger” for you to think seriously about your financial future?
1. When you receive the first paycheck
As soon as you receive your first salary slip, you look for the column which reads tax deductions. In the pursuit of saving tax, we often make financial decisions which might save us tax but also consume majority of our surplus. These mistakes come back to haunt us in the later stages of our life. The early starters also have the advantage of power of compounding. So start planning for retirement as soon as you start working. It allows you to save in smaller amounts and yet accumulate a substantial amount by the time you retire. Most of the financial mistakes are done between the ages of 24 – 30, at the early part of the career. It is important that we pay attention to our finances at these stages in order to make sure that these mistakes would not hamper our future prospects.
2. When you start receiving phone calls regarding insurance and investments
If you have neglected the first Trigger, this second one is a clear indication that you need professional advice. Phone calls about priority banking, investment options and insurance advertisements are signs of increasing monthly surplus. This trigger should motivate you to seek professional help to make sure your money doesn’t sit idle in your account. It is a sign which tells you that its time your money starts working for you and pay you back in the form of returns on the investments you start making.
3. When your tax savings under section 80C are greater than the limit
For most of us, 80C is the holy grail of financial planning, 70% of the financial products by average Indian Investors are bought in the name of tax savings. We often overlook the possible changes in the future and get stuck with few bad choices which account for majority of available surplus. For example, if we opt for an insurance policy for which the premiums are to be made for 15 years and after making payments for 5 years you decided to buy a house covering 80C with home loan and PF amount. Insurance policy which was taken for tax savings is no longer necessary. But still you have to make payments in the fear of loss of payments already made. Correcting past financial mistakes is important to ensure that good money does not chase bad money.
4. When you invest only in gold/FDs/ Real Estate
Most of us are afraid of making the first move when it comes to investments. Lack of knowledge in finances often forces us to be conservative or opt for investments which are simpler to understand. This clearly prompts for a change in the investment strategy. You cannot hold the same fund for every season. One should opt for a diversified portfolio. Defining the goals, their timelines and making investments based on the risk appetite with an objective to achieve the goals is important.
The changing socio economic structure of the country is making it increasingly important for every individual to plan their finances in a disciplined manner to ensure a financially secure future.
The triggers mentioned above are just a few of the many signs which warrant your attention for a secure financial future.
You might also be interested in reading:Here’s why one should not mix investment and insurance
