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BW Businessworld

Here’s How To Live A Richer Life

The biggest blunder in financial planning is to focus too much on “finance” and too little on “planning”

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Imagine, you are build-ing a home. And each month, depending on the money you have, you build a little more. One month, you add a wall. The next, you get the floor done. The third, you fit some taps in the bathroom. So you make it as you go, with no fixed plan. Sounds ridiculous, right? So ridiculous, in fact, that you cannot possibly do it. First of all, the government would insist on an approved plan before you even start. Yet, in perhaps one of the most important initiatives in your life — your journey to your financial freedom — you plan as you go.

The biggest blunder in financial planning is to focus too much on “finance” and too little on “planning”.

Let us say, you consider yourself to be a proud owner of a good financial plan. You know all the details of the instruments you have invested in, the returns, the portfolio, and the costs. You are meticulous in tracking your expenses and keeping them under check. You have a proper asset allocation in line with your age and risk profile, and you regularly rebalance to stay in line with your target. You have the SIPs going, so that you average out market swings. You have the right types and amounts of insurance. Will, done. Tax planning, done.

Great! I give you a 7 on 10! Want to know what it takes to get a 10?

Pull out your cheque book. Make out two cheques, one to your son, one to your daughter. Leave the date blank, as you don’t know when they will be cashed. But, fill in the amount. This is the amount you will bequeath to your heirs. Put these in sealed envelopes, and put them in a bank locker with instructions for them to be opened after your time. In your Will, go ahead and specify that anything left over would go to charity. Can you do this? How accurate do you think you would be?

Would your cheques bounce? Would you be leaving much more than you planned to charity?

Good financial planning should make a difference in the way you lead your life, now and in future. It should provide meaning to all the hard work you are putting in at your job. It should be a guide to what you should spend and what you should leave behind. Many of us will end up accumulating more wealth than we anticipate. The planning process should offer an insight into this wealth, and allow you to spend on things that matter and things that you enjoy the most.

Accumulated wealth provides great comfort and confidence as you approach the future. But it loses its utility rapidly beyond a point. Many of us have watched our parents go through their lives quite frugally, ending up with more money than they can spend at the end of their lives. At 80, there are only so many options they have for spending money.

As a planner, I am most delighted when I can make a tangible difference — a “lifestyle upgrade — to my clients’ lives.” The home you live in is the most tangible lifestyle upgrade you can make, because it delights you each day you live in it. Travel is another liberating and deeply fulfilling way to get more out of life. Engaging in charitable ventures can provide satisfaction and happiness at many levels. Whatever the avenue may be, the planning process should help you identify and make happen those experiences that make your life better.

Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house. Unless otherwise noted, the author is writing in his/her personal capacity. They are not intended and should not be thought to represent official ideas, attitudes, or policies of any agency or institution.

Shyam Sunder

The author is Managing Director of PeakAlpha Investment Services

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