Money management: Protect your financial assets and plan for the future

Have you been wondering how to safeguard your assets and plan your financial goals? Preetha Wali, Co-Founder, Pay It Forward shows the way.
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Once you are aware of the simple steps on how to start one’s financial journey, you need to focus on how to go about it.

Why does even the best sportsperson pad up before a match? Because they want to be well protected just in case they are hit. 

In personal finance also, this must be the very first step. You need to start with a safety harness.

Being Financially Independent in this day and age is a must, and it is not as hard as it might seem.



The safety harness

The 3 basic areas of keeping your finances safe are as follows:

* Create an Emergency Fund: Keep aside 6 to 8 months of your monthly expenses, in an easily accessible place, like an FD. This will help being prepared for life’s uncertainties and, equally important is the fact that it will keep you from derailing your investment plans.

*Buy insurance: While choosing insurance, ensure the cover is not only comprehensive but also that it will be sufficient when required. It must be calculated to fit one’s own needs like the number of dependents in your household, your lifestyle, whether you are staying in an expensive city, the coverage that is required, co-pay options, etc.

A very important aspect many of us overlook is to ensure if all details in the document are correctly filled. Even a small discrepancy can lead to a struggle at the time of claiming. 

* Write a Will: It is extremely crucial for everyone to write a Will and this has come to the fore much more during these COVID-19 times. Writing a Will ensures your assets are passed on as per your wish.

It is extremely crucial to write a will, especially when life throws unexpected curveballs at you.



Today one can sit at home and write a Will. Getting it registered is not mandatory but better, especially if one anticipates a dispute. Check online for other points to include in the Will.

What are your financial goals?

Classify each of your financial goals into short, medium or long term and then look for the appropriate assets. Investing for a short-term goal is ideally in an FD/ RD or a Liquid Fund; Medium-term goals can be found in bonds, ELSS etc. and Long term goals should be centred around Equity Funds, PPF, NPS or direct equity.

This kind of asset allocation helps diversify your investments across assets as per the goal, instead of the usual all eggs in one basket or other haphazard methods that we usually follow.

Don’t make these mistakes

While these are the very basic steps to a structured financial plan, there are a few common and costly, mistakes we need to avoid. In some cases, it is just a change of mindset.

Even though some of us plan our finances well, we still make the basic mistake of not including Inflation in our calculations.
If our child is due to go to college in 10 years, we should not only look at the present cost of college education but also add education inflation to get the future cost.

Learn to save enough in the case of future inflation



*Many people don’t give much importance to inflation or are not aware that the inflation number we see in the papers is not the figure to be considered for every goal. While presently the CPI figures say inflation is close to 7%, in reality, education, healthcare and lifestyle inflation are in double digits.

Insurance and Emergency Funds are not an investment to grow wealth. They are meant to help you tide over shortfalls and difficult times.

Do not look for returns. This is one major reason why we are mis-sold insurance products like ULIPs and traditional plans.

* Beware the debt trap. Some of our life goals are kind of fixed or known. Like, we know in 18 years we will require money for our child’s college education. We know at 58 or 60 we will retire.

We even know some of our short-term goals like taking a nice holiday next summer, buying that new phone soon. So why don’t we make a small mindset shift and save for this goal instead of taking a loan or buying on a credit card, which is also a loan, by the way.

Again, these are by no means comprehensive points. These are the steps to help you plan your finances well, correct some basic mistakes and also ask the right questions.

It is important to remember that working towards financial freedom is the best way to lead a stress-free and happier life.

(Picture Credits: Shutterstock)

Edited by Asha Chowdary