Dhanam Moolam Idam Jagath… –Money is the root of the world. Money helps in the fulfillment of life. Hence money management is very important but is quite often neglected. People work so hard to earn the money, but fail to utilize their hard-earned Money. The following are some of the key takeaways from this special day.
Lesson 1: First Fin-Teacher – Mother
Our mother is our first and best teacher in life. She helps the child in understanding the mistakes at times even punishing the child in a stringent manner to ensure the there is a learning from those mistakes committed and ensuring the same mistakes are avoided in the future. You may win or lose, beget profit or suffer loss, one thing you always gain is experience. Home is the first and the greatest school in life.
Some of the first and best financial lessons are also taught by the mother to the child about the importance of saving, staying away from debt, and the perils of over-spending and misspending, etc.
Lesson 2: First Fin-School
An important learning from this special day is to understand personal finances the right way and making the children understand the fundamentals of personal finance. These money-management lessons can be infused gradually over a period of time, starting with Piggy-Bank savings, opening a savings bank on the child’s name, making them aware of saving and thrift, and disadvantages of overspending, differentiating between needs and wants, etc. Maintaining a balance between supervision of how they use the money and giving them the liberty to utilize their money is important.
Children learn and grasp things quickly and much faster than grown-ups. The best way to make them understand personal finance management is to make them understand the financial planning nomenclature, terminology, basics of available financial products, etc. All of this can be done by gifting them a Comprehensive Financial Planning session on a special occasion like a birthday, festival (e.g. Janmashtami), the day they complete schooling, first Day of College, day of convocation, etc.
The earlier the better. Understanding personal financial planning concepts also groom the children into a financially educated and responsible adult and this would go a long way in their financial prosperity. Efficient management of personal finances will have a cascading effect on the next generation too.
Lesson 3: “Fin-‘Health is Wealth”
The age-old saying reminds everyone about the importance of good health in every aspect of life. Poor health has adverse effects on the financial well-being of the family as well.
Maintaining good physical health, requires strict adherence to a healthy lifestyle, physical exercise, a good diet, and a stress-free and contented life. It is also recommended to monitor the health by having regular Health check-ups and tests at periodical intervals of time.
Similarly, Personal Financial planning is incomplete without a Financial Health Check which is to understand one’s Current Financial State or the present state of one’s personal finances. This can be done by starting with assessing the monthly income and expenses, arriving at the average surplus (which is income minus expenses per month), and setting financial benchmarks and threshold limits for investments, expenses, risk management expenses( Insurance Premium), etc. All this can be fulfilled only under the aegis of a Comprehensive Financial Planner ensuring efficient personal Finance management.
Lesson 4: Fin-Compatibility – Fin-Patri
Financial Compatibility between Life-Partners/Husband& Wife is a pivotal factor leading to efficient personal Finance Management.
It is observed that most of the financial decisions are either taken independently by one of the family members. Most of the time, it is the bread-earning member/s or head of the family The other family members have no clue about some of the major financial decisions. This lack of transparency may hamper financial well-being in the long run.
If the personal finance decisions are taken on mutual consensus by family members especially husband and wife the transparency and combined financial resources would go a long way in ensuring financial prosperity and wealth creation.
Women, in general, manage a majority of the home finances towards household expenses. They have an accurate analysis and budget regarding the monthly groceries, expenses for laundry, wages paid to domestic help, etc. Even in modern times, men have no clue or little information. On the other hand, men take a majority of the decisions relating to investments in both real and financial assets, but it is ironic to see that the spouse does not always have the information regarding the same. This lack of information sharing and independent financial decisions may take away the comprehensiveness of personal finance management.
It is always better for all the family members to discuss each and every aspect of personal finances -be it budgeting of monthly expenses, identifying and prioritizing financial goals, investments, etc.
Lesson 5: Fin-Aware – Financial Literacy
A majority of the financial mistakes occur in the purchase of financial products, especially buying unproductive life insurance policies like Endowment, ULIP, Money-Back which are sold under an emotional disguise of Child Education Plans, Retirement Plans, Dream-Home Plans, Wealth Creation Plans, etc, The irony is that most of the insurance products hardly beat the inflation, let alone wealth creation.
It is a well-known fact that though the literacy level in India has increased phenomenally when it comes to financial awareness and financial literacy, we are still lagging behind. Most of the educated population is not financially educated or is accustomed to obsolete and traditional savings which fail to beat inflation.
Avail of the services of a comprehensive financial planner, who makes you financially aware and knowledgeable One may also attend several Investor Awareness Programmes organized by the Financial Services industry.
Lesson 6: Fin-Risk-Aversion Vs Fin-Risk Taking *DHAIRYE SAHASE LAKSHMI*
He who dares wins/ fortune favors the brave. This age-old saying reminds us that taking a calculated risk may result in the fulfillment of the goal. It is a well-known fact that as human beings, we are inherently risk-averse. This is the same even when it comes to financial planning and more specifically the risk Inherent in taking investment decisions. Though risk aversion or a conservative stance may be with an intention to safeguard money, the “my money is safe in a bank” assumption may not always be true. In reality, putting the money in a bank will lead to a drastic erosion in its value as the interest in savings schemes hardly beats inflation. Worse still, taxes are levied on interests earned from saving-Instruments like F.D’S, R.D’S, etc
In a nut-shell, if one has to take a risk, the financial planning decision has to be taken based on risk-appetite, the risk capacity (which is based upon the number of financial dependents), the investment horizon based on the duration of the financial goals, the profession, the life-stage, etc. which is based on several quantitative and qualitative aspects of the investor.
Lesson 7: Fin-Khushi
If you do what you enjoy, you would definitely enjoy what you do. The same applies in managing one’s personal finances, the more one indulges oneself in Personal finances, the more happiness, and the more satisfying can be the process. One should take the initiative in knowing more about the various aspects of financial planning and getting acquainted with the financial planning terminology and parlance.
Any change in the personal Finances like Salary hike, childbirth, purchase of Property, relocation, change of job/profession, etc., or any other micro-economic change which may directly impact the monthly cash flows or the net-worth, (Asset-Liabilities) should be informed to the Financial Planner. Updating of information of self and family in a consistent and continuous manner ensures the efficiency of the personal finance management and more importantly, it leads to happiness, satisfaction, and enjoyment in the Financial planning Journey achieving many a milestone on the way.
Lesson 8: Fin-Knowledge Sharing
One of the key learning’s from this special day is not only to learn but also to implement the good things. What we learn and should be shared with our near and dear ones. The advantages of Comprehensive Personal Financial Planning should be shared with one and all leading to the financial well-being of one and all.
The best way to promote comprehensive Financial Planning is to make the near and dear ones aware of the loopholes, misspending, mismanagement of personal finances, etc., and avail the services of a professional, qualified and comprehensive personal financial planner.
Let’s get you started with your comprehensive and goal-oriented financial planning with Ardour Wealth Management. Reach us to get advice from our FinTech Experts.
Disclaimer: This article is curated from information available across various blogs, websites, and personal experiences. The intent is only to spread financial literacy, awareness and not to take credit.
