Financial Goals

When we talk about financial goals, most of them are not sure or it is decided on circumstance.

To have a better understanding for the need of this, you need to understand what you target for. It has to be done through planned manner.

Remember 'ROME was not BUILT in a day'.

To achieve your financial goals, it might take 5 to 20 years, unless we have spare or free money due to some wealth left by our forefathers, which is not going to happen.

In Simple terms, get your finance streamlined.

• Calculate the current total debts or liabilities, if you have any.
  
• Plan, what you need to buy so that you have a target for your finance.
  

The Basic step of achieving financial goal is by setting up the foundation even before the plan in started.

1. Get one Insurance Policy
   

• Preferably a Term Insurance for [ YourDream x 2 ] ex: If you are planning to buy a house for 25L or your liabilities is 25L, then your term insurance value should be 50L
  
• Other than Term Insurance, I will NOT recommend any other Insurance policy as their value or factors are nil and you get a mere 4 to 5% or less return at the end of its tenure.
  
• Personally I will NOT recommend ULIP based Insurance, as the basic idea of cover during crisis is lost here.
  

1. Get an Health care or Medical Policy
   

• Since most of them are covered under corporate level schemes, it might not be necessary however
  
• Have one additional in hand, it will be useful when we retire to take care of ourselves as that time, the policy cost will be very high or most of them don't allow subscribing / opening new policy after certain age limit.
  

Once you are covered financially & health wise, you need to plan your finance systematically. I have divided that into certain parts, so that you can understand them.

PART A

The first & foremost is close all your existing loans or debts like credit card, personal loan etc..

• If you unable to close them. Convert them in low-interest loans.
  
• If you have a credit card loan
  • By taking a loan from a friend or relative
    
  • Or by opting for Balance Transfers
    
  • Or by taking a Personal Loan
    
• Stop using credit cards, if you are unable to control using it or if you have urge of shopping always.
  

PART B

Once you are out of debts, now it is time to build wealth. Before building wealth, you need plan for the target or what you need to have. It can be anything but remember be realistic or that can be achievable.

Some of the wealth options are

1. Real Estate [House/Flat/Land/Property/Bungalow/Designer houses]
   
2. Jewels / Diamonds
   
3. Four Wheeler / Two Wheelers
   
4. Foreign Holiday Trip
   
5. Child's Education
   
6. Child's Marriage
   
7. To start a business of your own
   
8. Medical Emergencies, if any.
   

PART C

Now you have the target in your mind, so you need to work towards it. Money or wealth can be built in…

In Debt market

In Equity market

What is debt market?

In layman approach: Any investment or savings, which does not change or erode the principle, is called debt market. The outcome is static.

Ex: Government bonds, Savings Account, Fixed Deposits, Real Estate*, Gold*, Jewels*, Diamonds

What is equity market?

In layman approach: Any investment or savings, which increases or decreases the principle drastically, is called Equity market. The outcome is dynamic.

Ex: Real Estate*, Chit funds, Mutual Funds, Share market, Gold* etc...

To understand why you should invest or start saving money…read my earlier blog 'Investment in nutshell'

NOTE: * - Some investment like Real Estate & Gold are both in Debt & Equity. I will tell you...why I have mentioned like that.


For detailed type of recommended investment, I will do inform you in my next blog.


Until then, happy reading.

Equities & Investments in a nutshell

When we talk about Equities, everybody is scared!


Everyone feels that it is only for Bankers or Financial experts to deal with!


No...literally not. I will try to explain equities as simple as possible here.


In Life, we live to earn money and we need to money to live, so both are relative in one sense.


Work turns to money, money turns to love, love turns into relations, relations turn to family.


Money can be grown or saved in two types, other than work.


1. Debt
2. Equities


1. Debt - These are standard rates provided by a well know guarantor probably by a Government or Society or by a Financial Institution with limited liability.


2. Equities - These are variable rates provided by a Private or Individual body governed by the rules laid by the Government or Society.


Classifying Debt & Equities


Debt - Bonds, Saving Bank Account, Saving Certificates, Tax Saver Bonds, Infrastructure Bonds, National Tax Schemes, Pension Schemes, where the money is used for betterment of a Country or an Society. Since they don't have income, they provide standard rates or less rates compared to the Market.


Equities - Investing in Stocks or idea or an product or technology or line of business is which the income is variable due to market conditions, product success or economic conditions, are usually high or low compared to the standard rates.


Examples of Debt : Bonds, NSC, PPF, IRS, VPF, Gold, Real Estate etc...
Examples of Equity : Stocks, Company etc...


Everybody will say Gold or Real Estate is not debt. Yes, it was. Now, due to economic conditions change, growth in population, need of safe haven, these products have changed from Debt to Equity.


Few years back, crude oil was considered to be the best equity, now due to economic conditions it has lost its lustre.


There are usually three type of Investment Profiles..


1. A person who spends
2. A persons who spends & saves money
3. A person who saves money & make others to spend


1. Who spends - He actually spends, in-turn someone earns the money from him.
2. Spends & Saves - He spends what he wants and he saves, for spending again by someone else
3. Saves & Others Spend - He saves and saves, ensuring he spends during the later stage of his life or someone spends after him.


What money we spend or saved, either it is earned by us or spend by us or will be spend by someone else.


Debt is easy to Invest. A layman can know the product ex: Gold or House. If he wants a two or three bedroom house, he will go for it, but he does have specifications. These specifications are known by us, from birth. Like a house will have Front Room, Bed Room, Dining Hall, Balcony, Bathroom [attached / common] etc...


Equities is an Mirage. Everybody is scared, because they have the feel that it is dynamic say it has ups & downs. The market condition changes, so does its value.


Equities are similar to buying a house. You need to check for the company profile, product, idea, management, skills, technology. These are the specifications that are needs to be followed, similar to a house purchase.


To make Equities more simple, financial experts have introduced Mutual Funds.


Mutual Fund is a body which manages the funds we invest through them. They invest in Debt & Equity related markets making our life simple but still rewarding with what we need 'Extra Money'.


Mutual Fund are classified into multiple fund type..


1. Debt funds
2. Equity funds
3. Balanced funds [mix of Debt & Equity fund]
4. Thematic fund [specific to industry or product or concept]


If you are a spender - invest in Equity based mutual fund
If you are a person who spends & saves money - invest in Balanced Mutual Funds
If you save, makes others to spend - invest in Debt mutual funds


Multiple vendors or bodies are available across the globe who manage these kind of funds. Recommend you to rely on your country specific mutual fund manager, who will guide you based on  your spending appetite.