“When health is absent … wealth becomes useless,” the ancient Greek physician Herophilus once famously said.
Every day we speak about building and safeguarding our money but there is little or no use in accumulating wealth if you don’t have your health so that you and your loved ones can enjoy it.
The condition of your own health and wealth can be reviewed, analyzed and revised with a three-pronged approach. 1. Have your health and wealth assessed annually, by experts. 2. Ensure that you have the right professional offering the advice to you. 3. Most critical : To Take action based on the advice you receive. We all procastinate decisions at one point or the other which may cost us hevily
The common & basics of creating a healthier lifestyle include eating the right foods for your body, cutting out or limiting sugar, exercising regularly, not smoking, limiting alcohol consumption, getting plenty of sleep and avoiding stressful situations.
The steps for devising, implementing and managing financial planning strategies are, arguably, not quite as simple due to the personal circumstances of each individual.
Savings are a fundamental part of a robust personal financial plan. By building a savings safety net, you will be able to financially meet your immediate financial needs, costs of emergencies without having to increase credit card debt, ask for loans.
Don’t forget investing your savings to beat the inflation wich will asurp the purchasing power of your saved money in the long term.
Tax efficiency should not be ignored.
Last and ultimate safeguard is insurance, including life and critical illness
Growing and protecting your retirement income is also a critical pillar. The sooner you start the easier will be the journey.
The connection between health and wealth is deep, and it is therefore important to create and roll out strategies to manage both so you can truly enjoy life-enhancing benefits and opportunities.
When to start ?
Youth is a huge advantage when it comes to building wealth for retirement because it gives you time to maximize the power of compound interest. With compounding, you can save a little now and reap big rewards later. And in your 20s, you may not have a mortgage to pay or a family to support, so saving is easier. Don’t pass up the opportunity to get a jump-start on saving for retirement. While there is a lot to learn, but if you are in your 20s and you are just getting started, get the ball by learning these 5 steps in your financial planning process :
1. Budgeting 2. saving 3. Investment products 4. Financial metrics and 5. Taxes
👉 SET GOALS AND INVEST WITH A PLAN If you haven’t started creating your goals, we recommend you start off with three basic financial goals for yourself 1. Setup an emergency fund (3 to 6 months of expenses) 2. A wealth goal (like, 1 crore by the age of 30) 3. A retirement goal (like 10 crores by the age of 60)
👉 LEAN ON EQUITIES Longer-term goals like buying a house, child’s education, retirement etc. need a lot of money which can even run into a few crores. The ideal asset strategy for long-term investments is to allocate a higher proportion of it to equities Infact a thumb rule which works perfectly in the 20s is the “100 minus age” rule. Per this rule, the difference of 100 and your age is ideally the percentage of equity you need to have in your portfolio. Do not to put money in cryptocurrencies, futures, options and even stocks, if you don’t understand how these are priced and valued
👉 AUTOMATE IT The most effective way of automating your investments is by setting up a systematic investment plan or SIP. Quite simply, an SIP is a system which effects the purchase of units in a mutual fund scheme of your choice for a particular amount and on a particular date every month. Be consistent. Would you stop taking care of your teeth after winning a Best Smile Award? Similarly, investment is a habit for life. Consistency is the only way to make it so. Many a month you may feel like skipping due to some reason. Signing up for an SIP�can inculcate financial discipline in you. However, you cannot stop once you feel that you have saved enough.
Instead of spending an entire weekend watching Netflix, use that free time to develop additional income streams. Pick up a side hustle: Rent your car, sell things you don’t need, take on some freelance gigs. The opportunities are endless.
If none of the above sounds appealing, you should still be active in trying to boost your earnings. That might mean asking for a raise, looking for another job where you can negotiate a higher salary, or opening an investing account (Warren Buffett recommends investing in a low-cost index fund). Follow WArren Budffet’s advices and you can create your own investment plan. If your wealth can generate enough income that replaces what you are already earning, you are ready to retire. The 40s is the time to ask that question. The time you retire, you should have say 30% of your wealth in property, 30% in equity to offer growth and inflation protection, 30% in income assets that generate regular cash for your use, and the balance 10% for anything unexpected. The 40s is the time to set yourself towards building assets to a plan. There is no perfect time for specific actions in personal finance. It is a journey with wealth, where we make plans but are willing to make mid-course corrections as needed. If you are in a place where your income is poised to take off, you have to guard against lifestyle and the urge to spend it all on an extravagant lifestyle. The 40s in the story is just an indicative point for evaluation. Do what sails your boat, but always ensure that your income, today and tomorrow is stable, secure, and adequate.
– By Aarti M
Intern at digitaldeepak.com