As we complete 73 years of independence, let’s look within and ascertain if we are truly free from the stress and worries that bog us down in our day-to-day lives. We constantly worry about our finances — have we saved enough? Have we invested enough? Have we invested in the right funds? Are we getting the right advice? What if we don’t have enough funds when we retire? The doubts tend to consume us, forcing us to either work harder, at the cost of our health and well-being, or falling prey to wrong advice from our so called well-wishers.
Before I share tips on how to free yourselves from financial worries, we need to understand the root cause of these worries. Money being the foundation of everything we do and need in life, it is natural that we are very sensitive towards the subject. This complicates our relationship with money and our faith in our goals and decisions tends to waver. Sometimes, we get too greedy, sometimes too cautious and we are always very nervous when investing. We want the top performing fund in our portfolio, but we cannot even imagine making a loss on it. But setting unrealistic benchmarks is another reason we lose sleep over our investments.Does this mean that freedom from financial worries is an impossible dream? Not at all. Everyone can attain this freedom and the only way to do so would be by planning, being perseverant and patient. We need to design an investment plan that truly aligns with our needs and aspirations, and adhere to this plan. A good place to start for a worry-free investment plan is to do some financial soul searching with these questions:
How much can I realistically save? What do I want to achieve in life? How much money will I need to achieve these goals? What is the rate of return I will get?
While these aren’t all the answers we need to make our plan, they will give us direction in overcoming the initial worries. It is advisable to work on this with a financial advisor as they may be able to navigate our finances optimally.
The next steps for breaking out of the worry chains are as follows:
Set your financial goals : As with any good plan, we first start with the destination before we set off on our journey. Similarly, with investments begin by defining our financial goals. When setting the goals, take into account the time horizon for each goal, our risk appetite, our income, our expenses, our liquidity needs and return requirements. Once these are clearly outlined, we are on our way to freedom. Build an emergency fund : One of our main worries is what would happen if we had to face any unexpected situation. Will we have access to enough liquidity? Will we be able to meet the expenses? Will we go into debt? Will we have to dip into the corpus set up for other important financial goals? Instead of being foolhardy, set up an emergency fund as one of the financial goals. It should comprise of 4-6 months of our family’s living expenses. This should cushion any blow that life delivers and helps us live worry free. Maintain a savings budget not an expense budget : When planning our annual finances, focus on how much to save versus saving whatever remains from our income. Once we decide to save, ideally 15-20 percent of our annual gross income, we can then allocate our funds to expenses. This will go a long way in curbing unnecessary expenditure. The reason this works to keep us worry-free is because we will not get so carried away with our spending that our savings take a hit. The savings is taken care of first and then our subsequent needs.
Even though money is a means to an end and not an end in itself, it plays a huge role in your life. You should consistently review and analyse your goals and your financial habits. Maintaining a healthy relationship with your finances is crucial for living a worry-free life.
Amar Pandit is the founder of financial planning platform Happyness Factory.