FRIDAY, APRIL 19, 2024
Elesbaan Pereira
One of the best revelations that the recent Covid-19 pandemic brought forth to us was the importance of proper Financial Planning in our daily lives. Almost every human was taken aback by the unprecedented impact that it left on our finances due to job losses and abrupt medical expenses with many plunging into a debt trap.
As per SEBI, only 27% of India's population is financially literate, which is an alarming reality. We Goans are estimated to have one of the highest per capita income in the country hence the need for proper money management becomes all the more paramount. We need to follow a well-disciplined approach and set financial goals for our future expenses which conventionally include purchase of a new home, marriage, child education, retirement, etc.
What most of us fail to comprehend is that when most of our savings are directed towards low return yielding investments such as Fixed deposits and postal schemes, the Inflation factor eats up into the returns thus leaving us with a substandard post-tax return. Investments should be made across a mix of asset classes and it is recommended that mutual funds and equity investments should be an integral part of everyone's long term portfolio given the proven track record of generating a better inflation adjusted return in the long run.
AMFI's latest data states that only 2.5% Indians invest in Mutual Funds whilst in developed countries like the United States the number is at a whopping 46% which shows how much awareness needs to be raised towards making people comfortable with the "equity culture". Traditional investments like FDs do provide the comfort of a fixed return but at the same time end up providing a poor post-tax yield whereas equity investments have helped people create substantial wealth in the past through convenient modes like the Systematic Investment Plan (SIP).
There is a sizable population of NRI Goans who are employed overseas on land as well as in the maritime fraternity who sacrifice a lot by being away from their families for most of their lives. Most of these NRIs don't have the comfort of a lifelong pension and hence the notion of saving and choosing a proper investment vehicle becomes all the more critical. Given the limited years of work they have at their disposal, they can aim for an early retirement by structuring an investment plan for themselves.
We need to keep a check on overspending by prioritising our "needs" over "wants". The youth in particular need to be more responsible in their expenditure habits by restricting the usage of easily accessible financial instruments like the credit card which usually provide a higher spending limit and should instead inculcate a habit of saving early in their careers. And finally to help us deal with unforeseen circumstances, a Health insurance and a Term Insurance is a necessity which will ensure that our lifelong savings are not exhausted in case of any eventuality.
With proper financial planning, we can be self-assured that things will be much easier while dealing with out of the blue money matters and at the same time help us towards attaining financial freedom.
