4 Power Steps to Financial Wellness

I define Financial Wellness as Achieving our Financial Goals while Maximising Joy. 

The path involves achieving our goals in a planned manner with sufficient analysis of risks involved and also alternative plans to manage different scenarios. 

In this article, I am going to introduce the 4 Power Steps to Financial Wellness. This will be the primer to a series of articles that will discuss the 4 Power Steps in detail. 

First Step to Financial Wellness – Budgeting

The first step to Financial Wellness is Budgeting. Budgeting is not just about making ends meet (which is the starting point for most individuals and families), but about creating a significant surplus. Please check out these articles for more on Budgeting:

1. Budget – First Step to Financial Wellness
2. 3As Formula for Managing Expenses
3. Financial Wellness at the time of Covid-19 Lockdown

Second Power Step to Financial Wellness – Debt Management 

Debt management is very critical to Financial Wellness. In today’s living being debt free is almost impossible. But managing debt with a few key principles ensures that we can have Financial Wellness in spite of debt. 

The key thought related to debt that is required is: Am I creating more value than the total payout for that loan? If the answer is No, can I think of reducing the quantum of the loan? (if not eliminate it totally). 

I will have a series of articles on debt management shortly. 

Third Power Step to Financial Wellness – Investments and Savings 

Having created a surplus in step1, the money needs to be saved and/ or invested to achieve our goals. I advocate Goal Based Financial Planning. I believe and have experienced that this approach ensures achieving Financial Wellness in a faster and planned manner.

I recommend a separate portfolio for each goal. Each one these goals will have their own risk management in place. This involves more planning and more monitoring. But the effort is worth it. 

I do not recommend the one risk profile for a person strategy used by some investment advisors. This is easy but achieving Financial Wellness using this method is difficult (if not impossible). 

Again there are a few basic principles/ domains that we have to understand. Some of them are:

1. Difference between Savings and Investments 
2. Difference between Assets, Expenses and Liabilities
3. Appropriate returns calculation methods
4. Ways and frequency of monitoring and rebalancing saving and investments
5. Wealth transmission methods

More about these in my future articles. Also we will have regular updates on current investment situations and opportunities. Please leave a comment below my articles or send me a message by SMS or WhatsApp or email, if you want alerts related to these posts. 

Fourth Power Step to Financial Wellness – Risk Management

Two things are certain things in life: Death and Taxes.

Benjamin Franklin. 

Though death is certain, its timing is not known to us. This brings about great risk for our loved ones. Whether we are around or not, our dreams and goals for our loved ones, have to be reached. This can be financially ascertained by Life Insurance. 

Also while alive, we need the support of Health Insurance, Accident Insurance, Vehicle insurance, etc to ensure that unexpected situations do not set back our financial plans in a big way. 

Taking up insurance plans are not one time activities. They need to be reviewed once every 3 to 4 years and revised if required based on the current situations. 

One needs to be clear and execute plans on these aspect of life insurance to achieve Financial Wellness. 

I will have a series of articles on these subjects also. I will also be reviewing life insurance term plans of different companies on a regular basis. I don’t recommend savings and investment oriented life insurance plans. 

Please send me an email of your existing insurance plans if you want a free review of them. 

Summary

I have given a brief overview of the 4 Power Steps to Financial Wellness in this article. There will be a series of articles on all these Power Steps. 

I have also promised to provide regular updates related to investment scenarios and opportunities so please visit at www.financialwellness.in atleast once a week.

In case you want a free no-obligations review of your existing insurance plans please send me a mail with their details.