Financial planning vs Inflation
Breaking the Cycle
(How Salaried Individuals Can Escape Financial Struggles and Secure Their Future)
Introduction:
In the realm of finance, time and investment wait for no one. The decision to embark on the journey or await the next opportunity rests solely with you. Money, revered as "Lakshmi" in our cultural heritage, carries the wisdom that "money has feet, it does not halt." The perpetual need for money spans a lifetime, from birth to the final moments.
However, the age-old battle between expenses and savings often leaves savings in the shadows, with only a meager share. The escalating salary, seemingly oblivious to inflation and evolving lifestyles, frequently overshadows the necessity of savings. But the question arises: Can this pattern be reversed? The answer lies within your mindset.
Understanding the Essence of Savings:
Consider savings as a seed you plant in the garden of life, requiring nurturing and attention to yield its beauty and fruits. Just as climatic conditions and care influence a seed's growth, dedication and responsibility are essential for cultivating consistent savings habits. Savings, in essence, involve setting aside money with a future goal in mind.
The nature of your goal shapes the purpose of your savings. Pursuing a depreciating asset like a car may lead to losses in the financial battlefield, while aiming for future responsibilities such as retirement planning, education funds, emergency reserves, stock investments for combating inflation, real estate acquisitions or leisurely adventures underscores the significance of goal-oriented savings.
Initiating the Investment Journey:
A common refrain from salaried individuals is, "Let me revel in life's luxuries; I've just begun working. I've endured frugality thus far, and now I can proudly flaunt a grand lifestyle—lavish house, car, designer attire, makeup, and the latest iPhone." With marriage, priorities shift towards supporting the family, and as parenthood beckons, financial resources are directed to provide for the child's well-being and education. Amid these obligations, the allure of market trends and new products continues to exert its influence.
By age 30, a realization often dawns, prompting hasty and misguided investment decisions. A more prudent approach would involve dedicating a fixed percentage, say 20% of your salary to savings from your very first paycheck. Seeking counsel from financial experts to delineate this allocation is paramount.
Identifying the Culprit:
The prevailing paycheck-centric mentality and psychological biases underlie this cycle of financial struggle.
In contrast, businesspersons often exhibit disciplined financial practices, allocating funds to savings before directing resources to their business ventures and personal expenditures. This divergence stems from their comprehensive understanding of financial principles and the imperative of capital preservation.
Breaking the Cycle:
To break free from the cycle of financial constraints, consider these pivotal steps:
Begin your savings journey with your inaugural paycheck, resisting unnecessary lifestyle inflation.
Allocate a fixed percentage (approximately 20%) of your salary to savings from the outset.
Seek guidance from financial advisors, steering clear of navigating the intricate financial landscape alone.
Acknowledge finance as a complex industry, just as you consult specialists in other fields, rely on financial experts for informed decisions.
Continuously assess future expenses and liabilities, entrusting investment management to professionals while abstaining from attempting to self-diagnose financial challenges.
Recognize the stages of investment—20s, 21-30s, 31-40s, 41-50s, and 60s—commencing your investment journey during your college years, not just after securing a job.
Conclusion:
To break free from perpetual financial struggles, heed these core principles:
Initiate savings with your first paycheck; delay lifestyle enhancements until true stability is achieved.
Dedicate a fixed portion (about 20%) of your salary to savings from the outset.
Leverage the expertise of financial advisors, avoiding the pitfalls of uninformed decisions. In the complex financial realm, distractions often lead down the wrong path.
Recognize finance as an intricate field, necessitating professional guidance—similar to consulting specialists in other domains.
Stay attuned to future expenses and liabilities, entrusting investment management to experts. Refrain from assuming the role of a financial expert.
Acknowledge the distinct investment stages in life, starting with your college years when stipends first roll in.
Authored by:
Mudra Mantra