Financial discipline is a cornerstone of stability. As an organisation, we regularly review our balance sheets, profit and loss statements, and budget allocations to ensure financial health and safety. However, many of us lack the same discipline when it comes to personal finance.
Financial Health Matters
Health and happiness are important aspects of life. Financial health is linked to both. It determines your financial position: an interplay of income, savings, expenses, and investments, which impacts future plans.
Keeping this in mind, SPIC, one of our group companies, recently conducted a session titled ‘Smart Financial Habits for Busy Professionals’. The session focused on the financial well-being of the staff. It demystified financial planning and provided practical guidance on managing personal finances. It also disproved a long-held misconception that only finance professionals understand financial matters and principles. In fact, every individual can develop a basic understanding of net worth, budgeting, expense tracking, innovative saving practices, emergency fund planning, and common financial traps.
Six Foundational Principles
In today’s fast-paced world, people overlook several foundational principles –
1. Savings, savings, savings
Set aside a small part of your income as savings. Experts usually recommend allocating between 20% to 30% of your earnings to savings. Track your expenses regularly to identify areas where spending can be reduced and resources better utilised.
2. Diversify as per your risk profile
Diversify into professionally regulated options like corporate bonds, mutual funds, equities, etc., as methods like fixed deposits alone may not generate returns that can beat inflation. Evaluate your financial situation to understand the amount of risk you can contend with.
3. Build emergency funds
Maintain sufficient funds for unforeseen emergencies, whether through health and life insurance or even liquid funds that you can access on short notice.
4. Plan for life events
Plan for major milestones based on your age profile. These include retirement funds, children, self-education, marriage, buying property, or even regular but higher expenses like a holiday, a vehicle, or pursuing a hobby.
5. Optimise tax planning
Smart and efficient tax planning is one way in which you can take maximum advantage and ensure optimal outflows and rebates.
6. Seek professional guidance
Refer to registered financial advisors. Available both in person and online, these advisors can provide transparent and professional advice at a reasonable cost.
Building Financial Literacy
Stable finances are not a product of one-time interventions. They are achieved through consistent, disciplined practice of financial principles. By investing in financial literacy, we aim to contribute to your overall well-being and enable you to focus more effectively on personal and professional responsibilities.
Disclaimer: This blog is for educational purposes only and should not be treated as a financial recommendation. Please seek professional guidance tailored to your individual circumstances.
