Know where you want to go. Then ensure your planning for financial requirements doesn’t depend on external factors
“Saab kahaan jana hein aapko (Sir, where do you want to go?)” is typically what an autorickshaw driver or a taxiwala would ask us when we flag them down.
Imagine our answer is “Pata nahi hein (I don’t know)”, how do you think the driver would react?
In all probability, after initial awe, he may either request us to alight, or take us on a long ride, to fulfil his goal of making money.
Remember this, those individuals who do not work for their own financial goals, work for someone else’s financial goals.
Goal setting, first step
The first step in any financial planning and wealth creation activity is to make a list of financial goals. Financial goals are those responsibilities and dreams for which we save and invest money.
All of us have a certain set of responsibilities and dreams in life for which we work hard. That hard-earned money is then invested after paying off our expenses.
“My financial goals and those of my wife are the same” is the typical answer from husbands. The same is true in the case of the wife if she is the active partner, of the two, in managing family finances. The typical answer from women would be “my husband earns and I am responsible for managing the show, he never questions me.”
As a financial planner, it is very common for me to hear such answers. However, real-life situations are different. The moment a separate sheet of paper is given to both the husband and wife to make a list of their family’s financial responsibilities and aspirations, the quantum of money needed and the priorities, the reality is different. Sometimes, the list is completely different. If that is not the case, then the priorities of each financial goal and the amount needed to fulfil it would vary.
Know your destination
Here is a suggestion, after reading this piece, at the earliest, take your selfie. If you are married, take one with your spouse. Next to it, write down the list of responsibilities and dreams for which as a family you have been creating wealth and will continue to create. This will give focus and direction to your wealth creation activity. From then on, every step of wealth creation will be in the direction of your own internal condition.
Those individuals and families who have not articulated their financial responsibilities and dreams are like passengers in a rickshaw/taxi not knowing where they want to go.
These individuals and families save and invest their hard-earned money looking outward. Their decisions are based on external factors; for example, investing in equity as an asset class if the markets are up, or in a bank fixed deposit if the rate of interest is quite decent.
Their chain of thoughts does not end there; they find excuses to postpone their decisions — such as a falling GDP or unstable geopolitical conditions.
Fulfilling our responsibilities is not dependent on external conditions.
If someone falls sick in the family and requires hospitalisation, we wouldn’t wait for the economy to stabilise to go ahead with the treatment. What are the chances of a family cancelling a vacation to Europe just because GST rates on international air tickets have gone up?
Only when there is no clear articulation of financial goals, individuals and families take financial decisions based on external conditions. External conditions are always volatile and fragile. Many of them are based on hearsay. This leads to anxiety.
Queries like “Should I buy, sell or hold?” are manifestations of investments which are not linked to financial goals.
“We were at complete ease this time when there was a fall in stock market. We knew our monthly SIP in equity-based funds is for a retirement which is more than decade away. Fall in stock market for 10 consecutive days also did not disturb us,” said a member of an audience in an investor awareness programme. This is an exemplification of investments made based on internal requirements. To this investor, the volatility outside did not lead to anxious moments.
My mind, my GDP
Wealth creation is a habit. Habit is an auto-behaviour of the mind. Develop the habit of looking within before taking and executing any financial decision. Instead of looking outside on parameters like the country’s GDP, GST rates or WPI, focus on the ‘My GDP’ — my goals and dream plan.
(The author is a financial planner and the author of Yogic Wealth)
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