Principles of managing personal finances
The basic principles of managing personal finances are simple - Set your financial goals, make an investment plan to achieve them, take an adequate cover for life,
health and assets, plan your taxes well in advance, etc. Yet, we see, many investors find it hard to implement the simple piece of advice given to improve their financial health. This indeed has a relation to advice we get to improve our physical health, 'Eat
right and exercise regularly' may sound simple and obvious, but is hard to implement. Isn't it?
This is mainly because we tend to be hostages of habits and routines. The positive side of this nature is that if we do make up our mind to follow a routine we will stick to it. The other side of this nature is that it is difficult to change our existing habits. So it all comes to taking the first step and form new habits. Say for example, most of us understand that life and health insurance covers are essential in case of an untoward event.
However, there are certain routines, such as mixing insurance with investment, relying only on employer-provided health cover, which deviate us from following the right practices i.e. separating insurance from investment and taking an independent health
cover. Then, there are also certain individuals, who believe taking insurance is a waste of money altogether. That's one of the reasons why insurance penetration (measured as the ratio of premium to gross domestic product) is very low in India, at 3.1 percent for life insurance and 0.8 percent for general insurance, as per the latest report. For the sector as a whole, it is 3.9 percent, as against the world average of 6.3 percent.
Further, it is a well-established fact that growth assets, such as equity, are best for long-term financial goals, since they tend to outperform all other assets in the long run and are inflation-and tax- efficient. Yet, we see, less than 5 percent of India's population investing into equity. Majority of investors prefer investing into debt instruments even for their long-term goals.
Real estate is another preferred option among investors, including wealthy. Nearly half of the Indian ultra high net-worth individuals (UHNWI) investment portfolios are allocated in property - the highest across the globe, according to the Knight Frank Wealth Report 2015.
These routines and practices are not only limited to insurance and investments, but also to taxes related investments. By now, most of us understand that taxes should be planned well in advance, preferably at the start of the new financial year, yet we tend to keep it for the last moment.
To reiterate, the basic principles of managing personal finances remain same and are simple. It is now time to implement them and secure our future.
Happy Investing
Source : Icicidirect.com
The basic principles of managing personal finances are simple - Set your financial goals, make an investment plan to achieve them, take an adequate cover for life,
health and assets, plan your taxes well in advance, etc. Yet, we see, many investors find it hard to implement the simple piece of advice given to improve their financial health. This indeed has a relation to advice we get to improve our physical health, 'Eat
right and exercise regularly' may sound simple and obvious, but is hard to implement. Isn't it?
This is mainly because we tend to be hostages of habits and routines. The positive side of this nature is that if we do make up our mind to follow a routine we will stick to it. The other side of this nature is that it is difficult to change our existing habits. So it all comes to taking the first step and form new habits. Say for example, most of us understand that life and health insurance covers are essential in case of an untoward event.
However, there are certain routines, such as mixing insurance with investment, relying only on employer-provided health cover, which deviate us from following the right practices i.e. separating insurance from investment and taking an independent health
cover. Then, there are also certain individuals, who believe taking insurance is a waste of money altogether. That's one of the reasons why insurance penetration (measured as the ratio of premium to gross domestic product) is very low in India, at 3.1 percent for life insurance and 0.8 percent for general insurance, as per the latest report. For the sector as a whole, it is 3.9 percent, as against the world average of 6.3 percent.
Further, it is a well-established fact that growth assets, such as equity, are best for long-term financial goals, since they tend to outperform all other assets in the long run and are inflation-and tax- efficient. Yet, we see, less than 5 percent of India's population investing into equity. Majority of investors prefer investing into debt instruments even for their long-term goals.
Real estate is another preferred option among investors, including wealthy. Nearly half of the Indian ultra high net-worth individuals (UHNWI) investment portfolios are allocated in property - the highest across the globe, according to the Knight Frank Wealth Report 2015.
These routines and practices are not only limited to insurance and investments, but also to taxes related investments. By now, most of us understand that taxes should be planned well in advance, preferably at the start of the new financial year, yet we tend to keep it for the last moment.
To reiterate, the basic principles of managing personal finances remain same and are simple. It is now time to implement them and secure our future.
Happy Investing
Source : Icicidirect.com
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