Controlling On Three Key & Crucial Factors Can Definitely Help You In Managing Your Long-Term Financial Goals Proportionately In Life
Though, it is really difficult to cut on your expenses today which always on new high as compared to your income which is the constraint. But that doesn’t mean you should not have control over your money flows and ultimately end up getting into liability which can erode your wealth. As no one can survive without money. On the other front economic is on the downturn in India currently. So it is very important to understand it’s importance since its going to affect your financial health in every single way. So doing financial planning is the smartest way of living happily until the end of your journey which is directly proportional to your wealth creation.
How to overcome these financial barriers systematically to help in wealth creation eventually
Lifestyle – This is one of the most important factors which determines our financial well-being. Whereas it changes as you age like in your early 20s and early30s and so on. As you are single in the 20s you are independent single so you have almost no responsibility and no liability but lifestyle depends on your earning. In the 30s you will have more responsibility so you will prioritize on your budget. Moreover, your lifestyle choice plays the very key role in saving. Suppose, you earn50K and you are keen to purchase a sedan car and the other guy who has same earning as 50k but he is more responsible so he is going to buy hatch pack car, thus he will end up saving more.
In another instance, again its your choice that matters in deciding how much to save like, if you love to relax on short-term vacation and you have second home in another beautiful city, then either you will go to your second home to relax if you are not much money conscious but again its by choice Another person who will have the same option would never mind saving more and renting his second home to someone on his short-term vacation, thus he will be a smart player.
Personal- It is the need at every stage of life. If you are in the early 20s, you are earning suppose 25k which is the good salary, you also have more saving at this stage, and fewer expenses since you are single as you don’t have responsibility on your shoulder at the moment.
As you enter into the 30s you are mature now, you become double from single, as priority is shared too, Expenses are more so saving keeps declining, you owe EMI of car, you Also pay in Insurance premium, for future uncertain losses., you invest in SIP on the whole your financial goals are growing too .So you are bound to prioritize your investment. You also prioritize for family planning at this stage and so for baby education, as these are the most important financial goal at this stage.But So your net-worth depends on your how you invest to meet your short term and long term goals since Now when you have entered in 35s so you are more grown as a person highly responsible for family and your most important Asset is still to be prioritized that is a Home loan. As it depends on your collateral too, You will definitely take home loan after finishing your Car EMI. Since Your Loan should not be more than 20% of your Income. And which also ultimately depends on individual credit score. Your smart health insurance package will protect you including your family without compromising on the best treatment. Here you will need to increase your saving by doing smart tax saving scheme investment , you will have a life insurance definitely as you are in the 40s which assure your family and one of the most key goal to protect your family future in uncertainty incase very unfortunately ,you being bread winner of family die in accident, but you didn’t have much saving for your family, in such crucial condition your family suffers if you have not taken life insurance which is not just insurance but is an assurance that even an insured accidentally died after paying few premiums, but family is completely liable for claim for huge losses .So it is the complete benefit to the family if incase insured dies hence, after meeting on all the certain conditions it’s an obligation to pay to insured family in their huge distress. As Retirement is your last stage when you need Pension from pension scheme you invested in, as your saving decreases, so your income takes reverse gear and health insurance to need at the best priority since your health deteriorates apparently. This is the stage when you are finished with your all financial goals.As this is only the stage where all your savings are utilized at its best since you are more prone to a health problem.
Socio-Economic (macroeconomic)-It impacts your net-worth which is involuntary action as it fully depends on financial market conditions and RBI guidelines.
Again it relies on market movement.During inflation, RBI will cease the money flow to control the economy. As during high Inflation, banks will offer high-interest rate on loan for you then you are less likely to borrow money due to less low purchasing power parity. But you will end up taking the loan if inflation goes down as the interest rate will be lowered since you were already waiting for interest to come down over the period of time. But you must always look what is your real return which is an interest amount after deduction from inflation rate.So if you have invested in debt which must not measure seeing a nominal return which works without inflation rate.For example, if the inflation rate is 5 % your real return will be like you gave a loan to bank Rs1000 @ 7%per annum. So your real interest return would be Rs 70 -Rs50 = Rs20 interest alone.
If the inflation rate is lower@ 3%, then your real return will be more lucrative as Rs70- Rs30= Rs40 interest amount excluding principle.
As an individual investor, you will be obviously a risk-averse, which is also related with your age, as in the 20s you are supposed to play with risk with ease since you are single and immature. So you end up doing wrong investment without analyzing yourself or from your financial advisor. But at the 30s you will be risk-averse , you will need more saving for the family you will give a thought of twice and thrice before taking the risk so you will like to invest more in debt rather than shares which are volatile in nature in short term. As net-worth matters more than only income factor since it is the amount left with you after deducting your all liabilities from your Assets. This actually gauges how affluential you are. The more you have asset and income more you are rich. So liability should be minimised in any case, to keep your finance planning cycle and running smoothly. So, as a smart investor, you would never like to put all eggs in one basket to avoid the risk if accidentally it may break.