Financial worries and how to overcome them

What do we need money for?

The most common answer to this will be about money as being the primary source of comfort in our lives. At the same time, money is also the primary reason behind most of our fears and worries. If we emulate our financial fears to our mortal fears such as death or loneliness, even that shouldn't come as a surprise to us.

Never let these concerns make you weak. Rather than letting these fears hamper our emotional and mental state; we should instead be wise enough to be aware of the likelihood of our financial situation transforming.

Let us here learn about the biggest financial fears of people and how can we overcome their effects in our life with a little planning and your financial acumen. This tally is a result of a public survey conducted recently.

1.Living a monthly salary mentality:

This trend can be observed more often among young adults, or people who are at the outset of their career. This kind of mindset can result into minimal savings. This can also land you in a cyclic trap of waiting for the salary day, to clear your chunk of bill payments. However, this attitude can be very well overcome in case you have enough savings.

How do you build ample savings?

There could be several ways you can accomplish this goals of yours. You can begin with putting a fixed amount out of your monthly income into a savings account. Once you are able to successfully accomplish this for a few months, you can try increasing the amount gradually.

Always ensure that you are doing it systematically, and if not increase; you are at least not cutting it short. Step by step as your savings start boosting, you can thereafter go on isolating some money for your emergency fund.

2. Losing employment:

If you are into a job, then it is apparent that your organization's performance will have a direct impact upon your job, and even whether you will be able to maintain it. Here, an emergency fund can be a valued resource that can help you survive your unemployment fear.

The Thumb Rule: A wise act here would be to save up to 6-8 months of your salary for a satisfying emergency fund.This emergency stock can ensure to keep you sheltered, in an unfortunate time including the loss of job.

3. Excessive Debt and Homelessness:

Arising out of the fear of joblessness, causes this fear to penetrate our minds. No job means pending bills, rapidly accumulating  debts, and sometimes may even land you into losing your home.

How to ensure that this fear doesn't become true? You should be consistently growing your savings and investments, along with maintaining liquidity. You can consider downsizing to a smaller and an economical housing option. This will ensure that you have a shelter, along with managing other life expenses.

4. Severe Indebtedness:

If you have piled up cumbersome debt on your credit cards, student loans, car loans, etc. it may seem really difficult to clear up all. It is truly likely to occur. Debts can result into strapping your cash reserves and consequently, make everything else mount up. This situation becomes more difficult for people with a meager debt-to-income ratio. For those, it can be struggling to qualify for the loans and other financial products they need, or even get a loan with a decent interest rate.

How to defeat this? Again here, developing a good savings will alleviate your debt fear. Such a person will be able to cover upon his/her unexpected expenses, and also be in a position to place more money up in advance while applying for loans.

5. Stolen Identity:

Pertaining to the increase in security breaches, identity concerns are much quite predictable. Any mishandling of our banking and security info, may lead to draining of our hard-earned savings and credit history.

How do we protect our identity? There are certain precautionary measures that can be taken to keep our identity info secure. Let's have a look at a few.

Always use secure passwords for all of your online transactions that include the input of any kind of banking information. Be cautious of suspicious calls or emails, especially when they are asking for any of your personal security information. Most importantly, being proactive will always help you defeat this fear.

6. Fear of Working Immortally:

With people now starting to work at quite an early age, this has become a much avertible fear. Pondering how?

Because they have the strongest means, Time, on their side. Therefore, they are able to opt for the pension and retirement plans within their company as early as possible. With this, they can ensure having a sufficient amount at the time of their retirement.

Dealing with this fear: How do we empower ourselves to save enough for our retirement? The answer to this may not be very difficult to accomplish. Always put your future wants on a high priority compared to your present needs. If you start saving early and be consistent with your savings habit, then gradually its worth will increase with time and the growth rate.

Consequently, your wealth will accumulate enough for your future sustenance.

7. Fear of loss in the Stock Market:

Never ever risk all your life savings in the Stock Trading. Rather, disperse your money between multiple assets. Be aware of your abilities and comfort zone, in order to invest accordingly. Always attempt for a healthy long term portfolio to become wealthy.

Fix: It may be true that with higher risks comes higher returns. However, you should only opt for an investment option, which you are comfortable with. Try gambling only if you are ok with the possible option of losing and also ready to bear its repercussion.

With these 7 points, we have learnt about our biggest financial fears and possible ways to beat them. Rather than being unaware, facing the fear to find possible and viable ways to overcome the same will near you to conquer. It is evident that a coherent insight of the situation, will surely take you closer towards finding a strong financial solution.

The author is Ramalingam K, an MBA (Finance) and Certified Financial Planner. He is the Director and Chief Financial Planner of Holistic Investment Planners (www.holisticinvestment.in) a firm that offers Financial Planning and Wealth Management. He can be reached at ramalingam@holisticinvestment.in

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10 Principles to an Intelligent Investment Strategy

Making a smart investment is not a rocket science. It requires you to learn and follow the appropriate principles, with discipline.

An unfortunate thing about investment strategy is that most of what is taught is hazardous, as being only a half-truth. This abstract information could even prove to be expensive, many a times.

Let us now present before you the ten principles that have proven to help an investor advance higher up achieving investment success.

1. Follow the ‘Expectancy principle’:

a.       This applies relying on a systematic and analytical investment plan. Any other strategy will not give you the confidence to eventually profit. Investment is not like gambling. A good investor should rely on a calculated expectancy, in order to certainly profit from his strategy.

b.       It is important to be clear about whether you are investing for fun, or for profit. ‘Growing wealth’ is a science that is based on the fundamental principles of mathematical expectation. Therefore, you either invest scientifically with all the odds known, or you gamble with your financial future.

2. Don’t fall prey to delusions:

Never be influenced by financial forecasts, from the media or your investment prophet, while building your investment strategy. Forecasting can be explained as unknowable information. Any investment plan on the basis of future foretelling is essentially flawed, as it does not have any mathematical expectancy.

3. Invest in what you understand:

One of the best ways for expanding your investment knowledge is via due diligence process. Never neglect this and hurry into any strategy, due to timelines, anyone’s suggestion or just to put your money to use. This is about learning what one needs to know for making informed decisions.

Firstly, we should determine the mathematical expectation for your investment plan. This will help you consider only those investments that increase your portfolio’s expectations. Secondly, find out the correlation of your strategy. Doing this will help you build a portfolio to minimize the overall risks. Lastly, understand the risk management strategies, applying to your investment. This will help you accurately access your risk-to-reward ratio as well as get to know about how your capital is protected from permanent losses.

4. Compound Returns:

Compound growth is a measure of how any average person can attain extraordinary wealth. To work this out requires these actions: early investing, trust only known investment strategies that have a positive mathematical expectancy, reinvest on all profits, and add your earned income to your investment principal, to accelerate your compound growth.

5. Diversification:

The purpose behind diversification is lowering your portfolio’s risk profile. This can be done by adding the inversely correlated or non-correlated investment strategies. The idea behind this is to never add more of the same risk profile to any of the investment portfolio. Eventually the result is higher and consistent profits and lower portfolio risks.

6. Watchful Investment:

What does an investment strategy aim for? First is its “return of” capital, and only after that comes the “return on” capital. Profitable Investment is all about controlling permanent capital loss, via risk management disciplines.

How do you examine an investment strategy? Check if it has safeguards for managing risk exposure and controlling losses to such a level acceptable, under both normal and worse conditions.

7. Invest Offensively:

How do you balance your defensive investing strategies? While investing defensively, you must invest offensively. Each is incomplete without the other. While one manages risks and control losses, the other is for pursuing gains. Simply stating, offensive and defensive investment strategies are two sides of the same coin.

Instead of being too conservative or too aggressive, it is better to be moderate.

8. Liquidity: 

This refers to the ease with which an investment can be sold to convert to cash. Examples of liquid investment include bonds and large-cap stocks. Losing liquidity is equivalent to losing flexibility. Illiquidity eliminates the possibility of controlling risks and places extra premium on all other risk management tools.

9. Respect, but not obsess about, expenses:

Do your expenses add value in excess of your costs? Striking a balance between the two is the key. Therefore, one should neither be a miser or a wasteful. Rather, be smart by paying gladly for services that add value to your investment.

10. Improve your financial intelligence:

Benjamin Franklin has said, “An investment in knowledge pays the best interest”. Ever thought what is the best investment one can make and why? The answer is investing in yourself, the reason being no one can take it from you and most importantly, it will pay you dividends throughout your life.

These 10 investment strategies will help you make your financial dreams come true, whether it is building wealth from zero, or managing the already accumulated wealth better.

The author is Ramalingam K, an MBA (Finance) and Certified Financial Planner. He is the Director and Chief Financial Planner of Holistic Investment Planners (www.holisticinvestment.in) a firm that offers Financial Planning and Wealth Management. He can be reached at ramalingam@holisticinvestment.in

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5 traits of a poor financial advisor

1.       How do we decide upon choosing a good financial advisor?

A person can be termed as one, who is a true value addition to your financial wealth as well as provides you with profitable advice to enhance your quality of life. In other words, any person qualified enough to advice you on your fiscal matters so that you gain the confidence to follow that advice. This was just a brief definition for a right financial advisor.

Now, let us look at the other side in more detail. Thereby, let us try figuring out a few points below to help you decide that the advisor with those characteristics is not the right one for you.

2.       Behave in a condescending manner:

Not all clients seeking advice have to be necessarily cultivated and polished, on their financial matters. Such people may also take much interest in their money matters. Yet for a financial advisor, it is always a duty to explain the reason behind his course of action. Also, he should illustrate his financial product in a way that makes sense to the client end. In a case where you feel that your advisor is letting you down or fooling around you, then be assertive about never to trust upon such an advisor.

3.       No reply to calls and/or mails:

It is obvious for a good financial advisor to be busy, but not so that he does not have a fair amount of time for his clients. Doing this should be unacceptable, and clearly shows your lack of importance in the advisor's schedule. The optimal way, whenever a client makes a practical request, is to receive an early response to their queries. There is no sense in paying your advisor, if he is not devoting his sufficient amount of time into providing you the right financial advice.

4.       Absence of honest opinion:

For a healthy relationship between client and advisor, an honest and open communication are two very important aspects. This should exist on both sides. Sometimes, the client may express his desire to go for a particular investment. In such cases, it is the duty of a good financial advisor to keep his client informed about the rights and wrongs of the particular financial investment. If the advisor does not do so, he is lacking in his service delivery. After all, it is the money of the client that the advisor is advising for. A good advisor will never flatter his clients, just for earning his commissions and fees.

5.       Deny you seeking help from a third party overseer:

Never trust upon a financial advisor, who prevents you from having your account with a caretaker involvement in between. Wondering how having a mediator in between will be beneficial? A third party custodian will send you statements independent of your advisor, and in usual cases will also offer you the online accessibility for your account.

        6. Focus on personal interests:

This is among the most common issues arising, when dealing with commission (or compensation) based advisors. For example, the advisor might recommend you for investments that may not be the best solution for you, but is beneficial for him otherwise. Therefore, it is always good to be alert and safe by asking more questions. This will help you understand your advisor's compensation techniques, and check if the same can ever be a conflict of interest to the advisor in providing the apt advice.

Therefore, the points stated above should be considered as the least characteristics that one should look for in his financial advisor.

         Conclusion:

For an advisor exhibiting any of these features mentioned above on a regular basis, is a clear indication for you to begin looking for a new financial advisor.

The author is Ramalingam.K an MBA (Finance) and certified financial planner. He is the Director & Chief Financial Planner of holistic investment planners (www.holisticinvestment.in) a firm that offers Financial Planning and Wealth Management. He Can be reached at   ramalingam@holisticinvestment.in

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