Achieving Lifes Goals Gets Easier With Proper Financial Planning

Bill Gates once said, “If you are born poor, it’s not your mistake, but if you die poor, it’s your mistake.” This quote quite sums up the importance of planning your finances properly and juggling various aspects of managing incomes, expenses and investments. Investing may sound easy, but it comes with its own set of challenges, as the decisions we take today have the ability to shape our future and also decide whether we can achieve our financial goals.

PUKHRAJ LUNKAR
Owner- PRL Stock & Share Brokers Pvt. Ltd

Further, once you have planned for goals, financial discipline is equally important for the proper execution of your financial plans. If you are not able to stick with it in adverse situations and panic, creating wealth becomes all the more difficult. 

Abhishek Sharma, 41, runs a successful construction business in Assam and due to his nature of business,he has to travel frequently across various parts of the state. His family, living in Guwahati, consists of his wife, Sweta, and two daughters aged 7 and 11. Considering the nature of cash flows in the business, it has not been possible for him to save consistently. However, as a prudent measure, he pulls out profits from his business to pay for household expensesand parks the rest in bank fixed deposits (FDs). His current accumulated savings comprise of FDs and PPF account, totaling around Rs15 lakh, apart from owning the present house and office property. 

Given his financial needs to save enough for his daughter’s education and marriage and for his retirement corpus, he met Pukhraj, a registered financial advisor, who has been helping him with his financial goals. As the discussions progressed, he shared that he expects the current education cost at Rs15 lakh each,and further, the marriage expenses were expected to be Rs30 lakh at the current cost. Adjusting the expenses for education and marriage of his two daughters for future expected inflation, Abhishek required around Rs1.73 crore at various stages to achieve these goals. Further, considering his current lifestyle, the retirement corpus was estimated at Rs4.72 crore. While the task would have seemed large in the beginning, some calculations by Pukhraj helped clear off much tension from Abhishek’s head. 

“Abhishek’s present financial profile was only about the traditional investment products. He has never invested in stock markets and is not familiar with investment products other than FDs and Public Provident Fund (PPF). However, lately, the awareness about mutual funds as an investment product has been increasing and the increase in retail participation, especially from smaller locations, through mutual funds in the last couple of years is an evidence of how the middle class is now becoming an integral part of the growing economy,” said Pukhraj. 

Pukhraj came to the conclusion that regular and consistent savings through Systematic Investment Plans (SIPs) in mutual funds can help Abhishek achieve his goals. “Regular investments through SIP help you inculcate the habit of savings in your life as the amounts usually get deducted automatically from your bank account. Further, the cost of investments gets averaged across the market ups and downs.” Abhishek was required to invest Rs1 lakh a month to achieve all his financial goals. Considering the irregular cash flows, but the requirement of consistent savings, Abhishek was suggested to invest his surplus cash in liquid funds, and accordingly, manage the uneven inflows in the bank by redeeming liquid funds as and when required. 

“While the investment horizon stays long term, the portfolio performance will be reviewed on a periodical basis so that the financial goals don’t get out of reach. The present allocation has been into balanced advantage category of funds as the markets have been volatile,” Pukhraj explained his plans. 

As the household savings make a shift from physical assets to financial assets, mutual funds are emerging as the best investment option across the investment horizons.

The writer is owner- PRL stock and share brokers Pvt. Ltd., Member of NSE & BSE.