Diwali, popularly known as the festival of lights has several elucidations. The most common interpretation is about utilising the power of light to get rid of the darkness in our lives. But the more significant interpretation is to usher in prosperity and drive the financial hurdles out of our lives. For that, you require a good financial plan. Financial planning is believed to be the basic building block for wealth management as it provides an organised and disciplined approach towards creating wealth. Realising the importance of investing, following are five key financial planning tips to follow this festive season of Diwali 2020:
Make SMART goals and then make the plan
To ensure that your financial goals are clear are achievable, your goals should be SMART, i.e.
S – Specific (sensible, simple, significant)
M – Measurable (motivating, meaningful)
A – Achievable (attainable, agreed)
R – Relevant (realistic and resources, reasonable, results-based)
T – Time-bound (time-limit, time-based, timely, time-sensitive, time/cost limited)
Adopt a systematic approach to investing in creating wealth
Along with being offered different types of investment and investment options, investors are also offered various choices on how they want to invest. If you cannot afford a lumpsum investment at the moment, consider dividing your investment amount into small, insignificant parts to attain a significant corpus over a period. Systematic Investment Plan (SIP) is a way to invest in mutual funds systematically. SIP investment has a number of advantages. Firstly, it adopts financial discipline, which is mandatory to invest in mutual funds regularly. Secondly, it averages out the total cost of the mutual funds unit bought. Thirdly, investors are benefited by the power of compounding greatly that helps that create a significant corpus in the long run.
Squeeze as much as you can from your savings
Wealth management starts with savings, and contrary to popular belief, it is not what is left after undergoing all expenditures. Try making savings a particular target and work your budget consequently. If your saving target demands that you spend meagerly for the initial few years, so be it. The target savings are worked backwards based on your short-term, medium-term and long-term goals, and it must be a religious discipline for you. If you are waiting to earn enough to save, it might get too late for you. Try turning the process inside out.
Let each Diwali be the occasion where you review your financial journey
Making a financial plan is just part of the elaborate process of financial planning. Several things could change along the way. Your investments might not perform up to their mark, your financial needs and challenges might change along the way, or the market conditions might change drastically. All these situations call for a regular review of your financial goals and plans. An annual review is essential, although portfolio shifts could be done only when required.
This Diwali 2020, let’s strive to make a positive start towards wealth management. Let the festival of lights truly light up your lives and your financial future. Happy investing!