Are you really financially prepared?

Most of us associate goal achievement with fulfilling of our family responsibilities. If we are able to meet these responsibilities then we assume we don't need any financial planning. We hear many statements from our clients mentioning that we don't need any kind of planning,we have sufficient funds in place, I have crossed the age of planning and many more such statements. As a Financial Planner when do we say that the client is completely prepared for all his financial requirements.

Simple questions to check your financial independence:

• Can you completely leave your active working life to survive the rest of your life?
• Can you bifurcate your existing assets for your different goals and achieve your goals without any further twitching?
• Have you settled all your liabilities and can still manage your goal achievement?

Myths Busters : A few myths attached with goal achievement.

• Inflation – We make certain annual calculations as per our current expenses and assume it to cover all our requirements. Like you say, I have two land properties that will grow in value terms in coming few years and it will help me to cover for my daughter's wedding expenses or my retirement. However, the biggest road block in this growth is inflation – the increasing cost of living.The average inflation increase over the past few years have been around 7-8%. This means that every year the cost of essential goods has increased by 8% per annum. So, if you have think you have saved for retirement to maintain your lifestyle as per current expenses it is not sufficient.

• Insurance Policies - Owning number of polices especially expensive endowment or whole life policies is not sufficient. Endowment policies assure good amounts on maturity including hefty bonuses however these good amounts are not sufficient to cover your life expenses. More so even the monthly pension that we receive may not be equivalent to the monthly home expenses.

• Expecting family wealth - Many times, we delay or avoid our financial planning considering that we are going to own a huge amount of family estate as lineage over the coming times. It might give us a mental satisfaction but does not assure any concrete guarantee of the amount to be received. The only possible thing is if in case the amounts are not as per your calculations, you might suffer in your sunset days. Like if you get a property out of the estate and you expect to make good profit out of selling it. It could be possible that the property market at the same time is at its bottom low and the desired price cannot be achieved.

• Fixed Asset Allocation – Allocating assets across your goal requirement or identifying which asset would help you meet your goal is better then leaving unplanned assets. However, leaving the allocation unchurned or not reviewing it is equally harmful for goal planning. Assets should be regularly reviewed and monitored to match the goal requirement. Change in policies, taxation rules could make any particular asset class less attractive. So, it is necessary to keep on reviewing it regularly.

Hence, we state that even though you own assets and have sufficient monetary cushion, it is required to continuously monitor your decisions. A plan is never perfect and it gets better with every further review.