Tuesday, 24 July 2018

Is everybody else richer than you?


Our neighbours are going on a vacation again…

OMG! How many times he changes his mobile phone…

What! She bought a new car…


I am feeling stuck

You open your Facebook account and see most of your friends enjoying, having fun time, going on long trips, showing off their newly bought car as if it is just a toy car. In the end, you log out from Facebook wondering what on earth are you doing? How do they get to spend so much of their money while you are entrapped in this vicious saving cycle – saving for your Retirement, saving for your child’s education, paying EMI for that Home loan of yours, etc. etc.

What we forget to understand is that there are sides of people’s life which we can’t see. We are only seeing the happy parts – thanks to Social Media. We don’t see the hardships people undergo to possess what they have, or worst their wrong money decisions and its impact on their life in the long run. 

PEER PRESSURE
Peer pressure is the direct influence on people by the peers (people who are part of the same social group). If someone has bought a new car, we need it too. If they are going to a foreign land for vacation, we also should go. This ‘WE TOO’ attitude makes us spend more money than the required as we tend to get influenced by this peer pressure of doing the same things or have same experiences as our peer group in order to feel good.

DISPLAY OF WEALTH
Who doesn’t want to show off? Conspicuous Consumption is the purchase of goods and services for the specific purpose of displaying one’s wealth especially if the goods and services publicly displayed are too expensive for other members in the person’s class (SOURCE: Investopedia). Such behaviour can lead to wrong money decisions and spending money on the things that won’t matter in the long run. Though comparing yourself with the others might lead you towards economic success, but not for all. Some people get succumbed to wasting money on things which are not important.

THIS IS ONLY ONE SIDE OF THE STORY
What we see in others lives is the part that they want to show. You will never know how many hours they work to achieve what they have achieved or if they are actually content in the life they are leading. We only see where they are spending more, we never consider the things where they could be spending less. Expenditure that is more important for you might not be the same for them.


How you feel with regards to your money is actually more dependent on your behaviour rather than actual facts and figures. You might feel rich while seeing you bank balance or investment account and you might feel poor while checking your bills or liabilities.

Setting Financial goals helps in the decision-making process when it comes to mindless purchase. You check if this is the thing that you really need and if it will impact your savings towards your financial goal. You will definitely delay the purchase if it is putting your financial goal at the back burner.

At the end, it is your life and you need to decide if you wish to follow the other person or you wish to have some life goals of your own. When it comes to wealth, it is more about contentment rather than comparison.


Charu Hastir, CFPCM is founder of http://www.theriteplan.com/. Rite plan is an online financial planning portal created to achieve a single objective of providing easy and Do It Yourself Financial Planning to netizens. Rite Plan is wholly owned by Tikkun Olam Financial Planning Services LLP. Please visit: https://theriteplan.com/index.php?route=common/home/

Thursday, 21 June 2018

How to set your Long Term Financial Plan?


Let me start this blog with a question? Do you dream? I’m sure all of us have dreams some fulfilled, some yet to be fulfilled. How do you hope to accomplish the unfulfilled dreams? These dreams do surely need financial aid in the form of savings. And for that you have to think about your financial future. A survey done by Aviva India reflected that Indians lack the discipline to create robust financial plans to secure their future hence exposing them to uncertainty.

If you don’t have a financial plan, it would be difficult to make your money work for you. Without proper planning and goal, your money in the bank account will yield no results. Here are a few steps to help you build a financial plan.

I.                    Financial Assessment

You need to know where you stand in terms of your finances. Your current assets, liabilities, savings, and your financial goals. For making a picture, you need to have the frame first. Similarly, for building a financial plan you need to have a fair idea on your current financial situation. You should know important money aspects like your monthly average expenditure, a detailed report on your investments, and your net-worth. Once you have this big picture you can easily define your financial plan.

II.                  Decide on your Goals

You never go on a road trip without knowing your destination. Then why should you do the same when it comes to your finances? Goals could be either for long term or short term. Long term goals include goals like retirement planning, kid’s education and short-term goals include goals like buying a car, or a home. Sometimes goal classification also depends on your age e.g. if your kid is 15 years old, his graduation goal becomes a short-term goal as it needs to get accomplished in next 3 years. Goals should be SMART in nature.





I.                    What NEEDS to be done?

Now, you have set your goals which are SMART in nature. What is the next step? You need to know how much money you should save to achieve the goals. For that you need to know how much your savings will earn i.e. the rate of return at which your investments will perform. There are different savings instruments.

Equities – give higher returns over long-term but has volatile nature so you should have the heart to stay invested during market ups and downs.

Debt – gives conservative returns with less risk, but the quantum of investments has to be higher as money invested would be earning less.

Real Estate – a very illiquid investment but gets all the love due to its tangible nature.

Gold – an asset class to be used for diversification in the portfolio, but one shouldn’t have higher allocation.

There is no need for you to choose only one strategy for your investments. You can blend all depending upon your risk profile. And it is good to take conservative projections when it comes to expected returns from your savings for your goals.

II.                  Balance - Regular savings and expenses

Once we know our goals and the regular savings which are required to be done to achieve those goals, it is the time to do a reality check. Whether we will be able to save? This depends upon our current income and expenditure. If yes, then we should start saving immediately. If NO, we need to relook our goals once again. Questions like – are the goals realistic in nature, can they be achieved on time, should be asked. For non-negotiable goals like retirement or kid’s education – we need to try to reduce our expenditure so as to save for these goals. For negotiable goals like buying a house, or vacation goal, you can either reset the goal, or increase the time-line for the goal. All these changes should be thoroughly discussed with your family members who get affected by the goal and your financial planner.

III.                Regular Monitoring and Update

Once your financial plan is running, you should maintain the discipline of sticking to it. You should monitor your plan once a year or if there is any change in your lifestyle – may be a job change, or a salary hike, or even any change in the family structure.
It is also important to relook your investments on regular basis (at-least once in 6 months). Sometimes, the money we have invested isn’t giving the desired return, our risk preferences also change depending upon various factors. So, portfolio re-allocation has to be done on regular intervals otherwise it may lead to unaccomplished goals.

Financial Planning is a life-long process. One just can’t do it once a year and then leave it for the lifetime as it would need corrections, changes, updates just like your life which doesn’t stay the same forever.

Charu Hastir, CFPCM is founder of http://www.theriteplan.com/. Rite plan is an online financial planning portal created to achieve a single objective of providing easy and Do It Yourself Financial Planning to netizens. Rite Plan is wholly owned by Tikkun Olam Financial Planning Services LLP. Please visit: https://theriteplan.com/index.php?route=common/home/

Tuesday, 29 May 2018

Before you hire a Financial Planner!


We all have access to financial advisors in the form of our parents, siblings, or some friend who keeps on reading financial blogs to help us out with our financial queries. Though this all sounds good but at some point, in our lives we do realize the importance of professional advice and tend to go searching for a Financial Planner. There are pressing questions in our mind like how much to save for our child’s education, will I run out of money in my retirement?

There is no doubt that a certified financial planner will help you chalk out your future in a better manner than any of your friends. But, the answer to these questions vary from individual to individual. Your family circumstances, lifestyle, income, expenses, etc. Though a financial planner is supposed to give advice in your best interests but sometimes you do get to meet people who are more concerned about their own interests rather than client’s and you end up owning the products you never needed. Yes, there are rules/requirements which financial advisors should abide by before giving any recommendation but there are loopholes in the system as well.

At the end, it all falls on investor to decide whether the financial planner is worth the money he is paying for. There are few things one need to be aware of before hiring a financial advisor. Let’s go through them to have a better clarity.

How is your financial advisor charging you?

There are mainly three types of models: Fee based, commission based, and both. There are planners who make your financial plan, recommend you financial products as per the plan, and you can invest in the recommended products from anywhere. Then, there are advisors who get commission on the products they sell to the investors. And there are also advisors who charge both fee from the clients and commission from the products sold. Most of the times Fee only advisors have more ethical approach as they are not getting any commission on the financial products they recommend and hence give unbiased advice.

Is your Financial Planner qualified to offer financial advice?

Having a licence to sell doesn’t always make a financial advisor professionally qualified. You must ensure that he/she has proper education and certifications to back his advice. For e.g. a Certified Financial Planner will be able to chalk out your financial plan much more efficiently than an Insurance agent.

Is your Financial planner offering holistic advice?

Your financial life is not only about insurance, or FD’s or post office schemes. Your financial life includes every stage of your life where you need money. It could start from risk planning, to retirement planning, to your will or even your children’s education plans. So, ensure that your financial planner follows a holistic approach and shouldn’t be always worried about new or existing investments. He should review whether the financial goals will be met in time or not and what all actions are required to fulfil all your financial goals.

Is your Financial Planner promising heavenly returns?

 Sometimes we meet advisors who promise us double digit returns in 2-3 months period, and we        blindly believe their false promises. There is no magic wand when it comes to investments. Ask him  the basis of returns, the underlying assets where he is investing, if the investment company is registered or not. Don’t believe in sky rocket returns in a short time period because like everything else investments also need time and discipline.


Charu Hastir, CFPCM is founder of http://www.theriteplan.com/. Rite plan is an online financial planning portal created to achieve a single objective of providing easy and Do It Yourself Financial Planning to netizens. Rite Plan is wholly owned by Tikkun Olam Financial Planning Services LLP. Please visit: https://theriteplan.com/index.php?route=common/home/

Wednesday, 16 May 2018

Should you start Big when it comes to your investments?



The other day I met a Startup entrepreneur who was just talking about the importance of starting and that also starting big. As per him, a small game or investment had more chances of failure in comparison to playing big. I could understand being an entrepreneur myself that he is only thinking about launching big obviously with the backing of some deep pocketed private equity firm. But hey, I have also seen start ups who started small and made it big eventually slowly and steadily step by step.
Same is the case when it comes to investments. Should we start only when we have a big chunk sitting in our bank account or should we start small in systematic manner slowly accumulating our wealth. Let’s hear out some benefits of investing regularly rather than waiting to strike gold with the larger chunk of money.

1.       Less fear of markets
If you are a regular investor who invest systematically, you don’t need to time the markets as your investments are going to the markets in regular manner without your need to monitor the timing. Sometimes the markets would be low and sometimes they would be high, hence averaging your investments.

2.       Better Diversification
Rather than putting all your funds in one or two schemes you can start your SIP in a phased manner giving you time to check which strategy is working best for you. Despite having SIPs if you are checking your portfolio on daily basis and get hassled if the markets are volatile, it means that you have less risk appetite and should have less exposure towards equity.

3.       Boon for people with irregular income
If your income comes in phases, there are chances that you already have plans for your money before it hits your bank account. If you keep waiting to accumulate that big chunk for your investments, that day might never come as you would always have your expenses lined up. It makes sense to start your investments even with a small amount as it will keep your savings habit up in the course.

4.       Regular investments help you plan better
We all have financial goals and to achieve them we need to have certain amount of money by the goal date. These goals get achieved in a much better manner if we invest for them in a regular manner rather than investing irregularly. Consistent and Regular investments also help us check on where we stand with regards to our goals.

There are many options to build a house – some do it haphazardly and some take their time and build their house brick by brick paying attention to each and every detail. In the end, house built with proper care and planning lasts longer and serves purpose for the coming generations also. Similarly planned systematic investments done with the proper objective in mind takes care of financial goals and legacy planning as well. At least on One thing I agree with the entrepreneur friend of mine is – STARTING IS MORE IMPORTANT.



Charu Hastir, CFPCM is founder of http://www.theriteplan.com/. Rite plan is an online financial planning portal created to achieve a single objective of providing easy and Do It Yourself Financial Planning to netizens. Rite Plan is wholly owned by Tikkun Olam Financial Planning Services LLP. Please visit: https://theriteplan.com/index.php?route=common/home/