The ever-changing environment with globalised job market, technology paving way for new age job opportunities, gig workers and geo political uncertainties, one needs to plan for the uncertainties in their career. It is imperative for individuals to have a robust career plan but equally important is a strong and dependable personal financial planning.
In today’s times, neither the employers nor the employees plan with the mindset that one job will sustain the life of an individual. In these times career gaps and non-traditional career alternatives are becoming quite common but before one embarks on that journey, one needs to ensure that they have secured themselves and their dependents financially. This would not only enable a much-required sustenance but also mental peace to chalk out newer avenues of career.
Traditionally personal financial planning has been a focus only for High Networth Individuals (HNI’s) or for people closer to their retirement age. But as the Indian economy is growing at a fast pace, that is leading to a rapid rise of the middle and upper middle-class segment of population who are professionally educated and are willing to take riskier opportunities both in the job arena as well as starting up their own enterprises. Another critical element which warrants a sound financial planning is aspiration to have a better standard of living coupled with rising inflation.
While it is a well-established fact that a strong plan in any area acts as a strong foundation to help us achieve our goals. Ironically, another reality is that individuals especially in their young age don’t typically undertake personal financial planning seriously and struggle to maintain a good financial health for a long period of time. Financial planning is indeed a powerful medium to navigate through various unforeseen circumstances, creating a security net and control in an unpredictable professional landscape. This surely helps individuals to be more aware of their financial means and avoid debt trap and above all, gives them the confidence to manage career uncertainties with confidence.
Creating a personal financial plan in the first place is rigorous, important and many times an eye-opening exercise in many aspects.
The first step needs to be setting financial goals
1] Long term financial goals – typically with 5-10+ years of horizon
2] Medium term goals typically with a horizon of 3-5 years
3] Short term goals typically have a 1-3 year time horizon.
One needs to classify the key expenses like higher education, home buying, entrepreneurial venture, retirement planning in the financial plan ensures individuals stay focused and resilient amidst professional uncertainties.
Once these goals are well established, it is equally critical to measure one’s progress against these goals on a regular time interval. Another critical tool along with building a strong financial plan is financial budgeting. A robust monthly and yearly financial budgeting process can act as a strong anchor for the individuals to achieve their financial planning goals.
It is equally important to have one’s insurance policy to have sufficient medical coverage, coverage for job loss and life insurance to ensure financial security of the family. One can evaluate various forms of policy for minimal risk in case of any eventuality.A few of the critical considerations to be kept in mind while undertaking financial planning
1] One needs to spend time consciously on financial planning and executing the same. Most of the individuals spend disproportionate amount of time in earning money while there is a very small proportion of the time in investments and savings
2] Another critical element is to understand the importance of leverage or debt. This is a critical area to manage to avoid falling into debt trap.
3] It is important to diversify your investment in various asset classes to reduce the underlying risks as we;; as increase the return on investments. Some of the popular investment categories are stocks, mutual funds, real estate, bonds, gold etc.
4] It is important to understand underlying risks and potential return for each of the asset class before investing and every individual’s appetite and risk profile is different.
5] While personal financial planning can be undertaken independently, seeking professional guidance can amplify its effectiveness. Financial planners or advisors possess the expertise to develop personalized strategies tailored to individual circumstances.
6] While money is not everything, its importance can never be undervalued and it is an important aspect of life. Having a solid financial backing enables one to navigate through ups and downs of career and other life situations smoothly.
(The writer, Kshama Dhir, is a financial expert and start-up mentor)
