The question people are asking themselves which makes them uncomfortable is
Where is my money going….!!!!
In today’s world we earn a 6 digit salary, drive a car, live in a luxurious apartment but when you ask them a question that is this earning really enough to live a decent lifestyle post your retirement or can their family continue with the same lifestyle incase of death of the bread earner of the family. Mostly the answer is “they are not Sure or simply NO”.
We all have needs and desires which we want to be fulfilled and with the availability of credit we want to fulfill it today, but when these needs and desires start digging a hole in your pocket that is when you need to take control of your finances. One needs to ask few questions to themselves
Can I maintain the same lifestyle incase of any unforeseen event?
Do I have enough savings to meet contingency?
Am I investing correctly to have a secure life ?
If most of the answers are “NO”, then its time to act upon your finances or to consult a expert who can help plan your finances better….
The 5 Action steps
1) Understanding present Financial Situation: – Its very necessary to understand this basic step as to what is the current financial condition i.e what is the income and the expense, what are your assets and liabilities, what is the amount spent for various items? once you have these things ready, it will lay down a foundation to take control of your finances
2) Understanding your Goals & Priorities: - Every individual have some specific goals. It can be buying a car or buying a house…it can be child’s education or saving for child’s marriage. Goals will be different for every person depending upon his priority. So determining your goals is the next step.
3) Making a comprehensive financial plan:- It’s a more detailed step where the current income and expense analysis is been done, understanding the impact of liabilities on your budget, estimating the monetary value of goals, the amount required to meet contingency and unforeseen events.
4) Portfolio Construction:- At this point the plan is acted upon creating a budget for income and the way the income is spent, reducing liabilities by disciplinary pay-offs, allocating money into various investments products depending on your goals, time horizon for your goals and your current financial condition.
5) Monitoring the plan:- Portfolio construction is a dynamic process which does not end once its implemented as there is change in personal, social and economic factors. Regularly monitoring will help to bring all financial goals and activities in line with the current life condition.
Following these 5 Action steps can help you organize your finances and prepare you for the unforeseen circumstances of life.