This article appeared in Money Today….long back…..

From what to how

These days client questions have changed a little. No more is somebody asking—“Do I need to do financial planning?” Rather the questions are: “How do I do financial planning? What are the advantages?” These questions are difficult to answer.

How much money you have at the end of your working life is a function of how well you managed your money, not how much money you earned. Financial planning helps you feel good about the fact that you have choices in life — whether to work, what type of work to do, help friends and relatives, help your children or siblings to start a business.

Apart from this, you will need to plan your finances because you will live really long. Remember, after retirement, returns from investments will be your chief source of income. So there’s no doubt there, you must create wealth. Some people see wealth in terms of increased consumption, or increased potential for consumption. They are unable to put off consuming now for the promise of something better later on.

They live for the moment and have no understanding of the financial problems that may await them and their families, and the need to do something now to protect themselves against these perils and pitfalls. They may be investing too aggressively, saving too meekly or be completely uninsured or under-insured.

Investing is a game you can play for a few decades before you realise that you have goofed up. And you have no money for retirement. However by then you may be uninsurable and without adequate means to generate funds. On the other hand, many people excel as investors. They are on top of all the issues and immerse themselves in investment literature and knowledge.

They search out interesting investments and realise that in the investment world if you are doing what everyone else is doing you are probably doing the wrong thing or, if you are doing the right thing, you are doing it at the wrong time.

Or realise that if you are enjoying your investing, maybe you are getting it all wrong. And if your investment strategies are boring, maybe you have got the results right!

These people know that wealth means security, freedom and control over how they spend their time. They work hard at turning their jobs (or practices) into businesses, and automatically invest most of it, spending what they have not saved, rather than trying to save what they have not spent.

They avoid debt for consumption but take on investment debt when necessary. Asset protection strategies are basic concepts implemented routinely, and the estate planning for the next generation is taken care of already.

Steps are in place to transmit the wealth, and the attached security, freedom and control, to their children at an appropriate age and stage in life. Their enjoyment stems from a confidence that they are in control and doing what they want to do when they want to do it. No one tells them what to do. This is the great benefit of wealth.

By P V Subramanyam, Financial  Trainer,

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