In my business as a financial advisor, I have observed one
thing and this disheartens me. People set goals for long term, and they also
continue with investments till the end, yet sometimes they fail to achieve the desired
corpus which was projected at the start of their financial journey.
You must be wondering, why?
You might be thinking that may be I do not know my job well....
Before you make any judgments, I want you to go through this
complete article and then decide why it happens? How it happens and what goes
wrong?
Usually when I meet a prospect and discuss with him what
his/her or their short term, mid-term and long term goals are, they tell me
their various financial goals. Once they give their list of the financial goals
and the number of years in which they wish to achieve them, I take into
consideration various other important factors viz; their income levels, current
liabilities, expenses, current investments, their risk appetite etc.
Once armed with these details I do some number crunching and
some working and give them a picture of their current financial standing. Then
with that as background I help them prioritize their goals and the order of
importance. Sometimes I ask them to postpone some goal/s as their current
financial situation do not allow them to go for them now.
Once we are in agreement with that, then I go back and
return once again with a road map/ financial plan for them which will be able
to help them achieve their desired goals. Sometimes they start the plan as it
is, while at others we take a step up plan route.
Everything goes well for initial three to five years but
then things change. Now that the money is growing their focus diverts. And
since they are already seeing the money available in the portfolio, they
express their desire to withdraw some amount from this corpus in order to
fulfill their new fancy.
Nothing wrong with that. But what they forget is that the
corpus is being made for a goal which is still ten or twelve or fifteen years
away. Most of the time this far off goal is either higher education of their
kids or retirement of their own.
When one withdraws money in between, the future of these
long term plans gets affected. I bring this to their notice that doing so is
not what I would recommend as it will hamper their long term goals, for which
we did the whole exercise and started the plan in very first place.Some of them understand the point I try to make and do not
disturb the plan, while others say that this present thing is more important.
And that, since we still have time for that other goal we will refill the
amount which will be withdrawn as we go ahead.
In most of the cases I have seen that the refill
never happens. Because every now and then something or the other which they
feel is more important comes up.
What they also ignore or disregard is the fact that when they withdraw the
money before the desired tenure, the whole purpose of the financial planning
gets defeated. Why?
Because when a plan projection is made we take into
consideration various parameters.... returns and tenure being one of the main
criterias in it. What it means is that if
the amount which I suggest after applying various hypothesis and calculations
is invested regularly without any interruption for a particular goal as per the tenure, only then
can the goal be achieved. If one withdraws money in between, the returns gets
affected and so does the whole calculations and the workings for the plan.
And even if the refilling is to be done it will need much
bigger amount then the one which was initially calculated.
In wealth creation or financial planning one does not need
more MONEY, one only needs more TIME.
You cannot postpone your kid’s higher
education because you do not have enough money. Can you? Yes, for once you may
postpone your retirement, but then would you really would want that?
In my working experience of more than seventeen years as a
financial advisor, this is what I have observed, analyzed and realized. Higher
education of your kids, your own retirement, and your family’s health and
financial security are your basic needs and they need to be covered first.
Everything else can be added up later on when your finances allows that.
So my friends if you really want to achieve the financial
goals you desire, please start investing as soon as you can, and once you start
it please do not deviate from the plan.
Job of a good financial advisor is to come up with a
realistic and workable plan for you, and then help you achieve it. Annual
review, regular monitoring of your portfolio and making the necessary course
corrections as and when needed is both his job and his responsibility. You just
make sure that you follow the plan, keep the required discipline and stay
focused on the goals that you want to achieve. And he will ensure that you
achieve all your financial goals as smoothly as possible, without any stress :)
