Further to our discussion on financial planner-Mr. Insurance, I have come back with some more light on this topic.
In earlier discussion, we have seen how many dreams we can have in our life. Our dreams are endless and so are our wishes.
We will discuss here about our financial dreams. Meaning that those dreams which we can fulfill only with money otherwise they remain incomplete. For example, we may dream of going on world tour, buying a favorite vehicle for our safe and luxurious travelling convenience, buying own house, best of the education and care for our children, self marriage, children marriage, best of health care for our parents, best of own retirement, etc, etc. Needless to say, financial dreams are endless. We are having a huge capacity of dreaming and will always feel short of money while dreaming of something big.
Now as a first step for fulfilling our dreams, we need to take some actions. Let us do some mental exercise to care for our financial dreams; after all they belong to us.
Divide your dreams into different stages. Say for example, for a young 25 year old person, marriage or buying a house will be the first stage. If you have more than one dream to be fulfilled at the same point of time, make them one after the other, as the dreams are money oriented so it becomes difficult to spend on both of them together.
Segregate your dreams into short term, mid term and long term goals. Short term goals are those which need to be fulfilled in 5-7 years, mid term are those which may be fulfilled after 12-15 years and long term goals are those which can be fulfilled beyond 15 years.
After having set the timelines to your goals, try to quantify them. For example, again for a young person, average marriage expenses would be around Rupees 3-10 lakhs, buying a house would be around Rs.20-50 Lakhs and so on. You can associate one figure of amount to your dream and calculate how much you require at what period of time.
Does this exercise sound difficult? Not at all, but my dear friends, we hardly do it to fulfill our dreams and goals.
Now going further, start calculating your routine expenses. For example, cost of living, travelling, children school education, food and luxuries, etc. After knowing your monthly and yearly routine expenses, you can deduct them from your earnings. The remaining amount represents your saving.
You can add the element of your earning increments coupled with inflation rates. Earnings increase at an average rate of 10% or it depends on your personal performances whether in job or business. Inflation rates increase with different rates for different types of expenses. For example education expenses increase at the rate of 30% whereas food and other routine expenses increase at the rate of around 10%. Again luxurious items cost much more higher than a normal item. Thus you can attach these increased values to your own dreams and goals and earnings.
Now when you have an amount of saving in front of you, you would definitely want to invest it somewhere so that it earns some good returns, otherwise savings alone will not suffice to fulfill your dreams.
In the next article I will explain different ways of investments so that your hard earned and saved money can earn you a good return.