I was living in a rented house since 2005 when I moved from my parent’s house. Buying a house was quite expensive and I was unsure that I would work so long. Tenure for loans were 15-25 years. EMI’s were more expensive than the rent. I was not sure of many things while buying a house :
Will this place have water ? Will it be as crowded / traffic congested as any other place ?
I was so excited! My first job. This actually would mean independence. This would also mean that I would have a bank account and there would be a number bigger than 0 in my account. However, with the uncontrolled expenses, my bank account quickly got depleted as soon as my salary came in. Thankfully maturity came and as years passed by, I started gaining different types of assets including a house, a car, few more savings account, a fixed deposit, mutual fund , stocks etc…
From childhood, we have been raised in a certain way, which shapes our opinion and attitude towards money. Some are conservative with money , some are willing to take risks . It is important to know where you stand and therefore invest your money in instruments which reflect your risk profile.
What is Risk Profile ? Risk profile determines our attitude towards money and it is best you allow a financial planner , whom you trust, help you determine your risk profile towards money as it is important to have a unbiased perspective (as far as possible).
Goal setting, some of you are already familiar with this term, is an important exercise during the beginning of the appraisal year.
Goal planning , from a financial planning perspective, is as important. Unlike your appraisal this spans across multiple years .
Successful athletes, businessmen and achievers - all of them set goals in life. This gives life a purpose, a meaning. It provides you long term vision. You now know where your efforts need to be focussed.
There are two important factors in determining corpus for any goal. These are time horizon of investment and asset allocation .
Time Horizon Time Horizon is the amount of time from today to your goal start date. Greater the time, lesser would be the investment required, all other things remaining constant. Therefore it is always recommended to start early for your goals when time is by your side.
Asset Allocation Based on your risk profile and the time horizon, your asset allocation is determined.
