Simple steps to Financial Wellness
20 Simple steps to Financial Wellness
The general perception of people is that it’s not quite possible to realise all their financial goals/dreams without having a high salary or a rich family background.
This notion, due to current living environment and peer pressure, has increased stress levels related to money matters to a great extent which hinders people from being able to rightly weigh and judge their opportunities.
One need not suffer in life. He just needs to rightly maneuver his way out to reach financial freedom. And this, again, is not as hard as most people perceive.
Based on our research for over 40 years and our interactions with individuals, families and business owners, we have developed a proven strategy to attain financial peace.
We are happy to mention a few of these general guidelines for the benefit our readers. This strategy is condensed in the form of a 20-Steps to financial peace.
With the help of these guidelines & discipline one can fulfill all his dreams.
The following guidelines are generic and applicable to all. You may consult your financial advisor to modify and customise this financial road map specific to your life.
- Have an Emergency Fund set aside in a good liquid fund to support you for 6 months.
- Have a Term insurance with adequate cover. Term cover also for spouse if spouse is earning.
- Have a stand-alone health insurance cover for all family members even if your company covers you under group insurance.
- Remember, Insurance is not an investment and the premium may be kept under 10%. Insurance provides a financial safety net in case of undesired and unexpected events.
- Have 2 savings bank accounts. Preferably joint account with spouse.
Account 1 –For all transactions and
Account 2 – For all your monthly expenses.
- Consider investing about 30% or more to fund all your future goals such as :
- Education & marriage goals of children
- Retirement corpus.
- Life style requirements like car, electronic gadgets, Furniture etc.
- Vacation/Foreign travel.
- Health Fund for parents etc.
- 30 % of income towards living expenses.
- Try not to exceed 25% of your income towards Home loan & other borrowings.
- Home loan in joint names is preferable as it can give tax benefits and can protect the interests of the spouse who may outlive the other.
- 5% of your income may be set aside for self.
- 10% of your portfolio may be in Gold.
- Investing in a second residential property may be avoided as it may not give positive cash flow.
- It is always safe to come out of all kinds of borrowings before the age 40. Generally after 40 years, major responsibilities like Higher education, Marriage and retirement goals have to be addressed.
- Regular check on Nominations for all assets and financial instruments is important.
- Have a clearly written down WILL and update/revise it as and when required. Also identify a trustee and keep him informed of the existence of the WILL.
- Avoid emotional decisions. Seek professional help. Identify professionals with a good track record and maintain a good and lifetime relationship with them.
- Mentor – Generally guides you in all spheres of life.
- Financial advisor – Will ensure a financially stress-free life and peace of mind.
- Family doctor – Will keep you healthy so that you can perform uninterrupted.
- Chartered accountant – Will keep your financial books in order and rightly estimate your tax liability.
- Lawyer – Will make sure that you are protected from all legal hassles.
- You may also create an HUF account (Hindu undivided family account) and private trusts for tax efficiency and to safe guard your assets. (Seek professional help).
- Educate family members including children about financial matters and involve them so that they will be more responsible.
- Document, digitise and store all documents in a systematic way. Physical documents to be stored safely in a bank locker or any secure place.
- Review your financial port folio every six months.
These may be considered as guidelines which may or may not suit every individual’s needs. Our intention is to induce a thought process in the minds of people and dissolve the mind block that financial freedom is beyond their reach.
May you all have a happy day and reach a step closer to your financial freedom.
Images from google images.