Diwali: Illuminate the light of Financial Freedom

Mahesh Pai elaborates on finance essentials to be taken care of during the festive season

Diwali is the festival of joy, traditions and new beginnings, the ebullience on the streets, dazzling oil lamps, lanterns, rangoli and Diwali shopping just can’t go unnoticed. Many people spend ample money during this festive season. The festival of lights also teaches us lessons in financial and investment planning. The points below highlight the four personal finance essentials to be done during this festive season.

Start Investing for your Financial Goals
From retirement planning to saving for education and marriage, every investor has a lot of financial goals to fulfil. Each of these goals have to be planned well in advance and regular savings can provide exceptional returns over the long run. A concrete investment plan can help you keep on track rather than just investing into products you have no idea about.

Start Estate Planning
One area which gets the least focus is estate planning. People work hard and save and accumulate funds throughout our lives to own assets such as property, cars, jewellery, and even retirement investments. They would like to pass down their hard earned savings in a judicious manner to the next generation. Whatever we accumulate during our life forms our estate that we pass on to our next generations. Estate planning is not limited to wealthy people. Anyone who has a family must make sure he has a Will. Too many people do not envision estate planning because they think they do not own enough, they are not old enough, it will be costly or confusing, and they will have plenty of time to do it later. None of us really like to think about our own mortality but you need to be prepared for the unthinkable. Stopping fights even before they start is yet another reason why estate planning is necessary.

Diversify your risks
Don’t keep all your funds in one investment product, diversify your investments, and mitigate the risk. Diversification lets you achieve maximum returns from your portfolio, reduces volatility and it is the best for long term investments. If one asset class fails to perform up to the expectations, then the other asset classes would make up for the losses. Therefore, investors need not worry about market volatility as the diversified portfolio would provide some stability. But over-diversification can have negative results too.

Resolve your Debt
Being deep in debt can be stressful to you, your family, and majorly your health. The worry over how to pay the bills with rising inflation and the struggle to save for the future has impacted the population of India. Debt is often the result of poor financial habits developed over a period of time. One of the simplest methods to get out of a debt spiral is simply by taking close look at ones income and expenses. Though many people dislike the idea of living on a budget, the reality is that everyone does. People have a lot of loans and by the time one loan is ending people start planning for the next loan, all their life they work to only pay off the debt, and this pattern does not stop until they take a strong step to stop. Remember, it took years (possibly even decades) to build up those outstanding balances. Recovery will be a similarly slow process.
This Diwali, let us illuminate the light of financial freedom to live a financially secure life for years to come. There is nothing wrong in spending money on Diwali celebrations but why not spend it in a way where you can earn huge profits.
Everyone needs to evaluate their finances, cleanse themselves of bad financial habits, and invest. Early and smart investments mean better returns. When planning to invest, knowledge is the key and goal-based investing incorporates the changes in the existing financial plan and helps you gain maximum benefit. If you have decided on a goal, you can start investing from an earlier stage to meet those goals, these goals could be like retirement, buying a home, a car etc. while you are working for your goals It is important to identify investments that support those goals and keep a check incase if they are not performing well. Ensure that the existing investments are in sync with goals or objectives. Fortune favours those who plan for the future.

The writer is an investment consultant and business coach. Email: mahesh@maheshpai.in


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