FINANCIAL AWARENESS

Attitude towards money

"If a person gets his attitude toward money straight, it will help straighten out almost every other area in his life." Billy Graham.

• Basic knowledge of the subject essential to develop right attitude
• Money, a means to an end and NOT the end by itself
• Satisfaction in life a better aim and will come from leading a life of purpose
and fulfilling our desires in life.

Saving the right way

• These are two equations which are perfectly balanced but only one is the right
way and the other the wrong way. Let us look at these equations

(Income- Expenditure) = Savings

The wrong way ( Focus on expenditure)

(Income – Savings) = Expenditure The right way (Focus on Savings)

What it takes

Planning and goal setting
Self discipline and goal congruence.

Risk return relationship

In personal financial matters, one has to take affordable risk and aim to get returns which then beat the inflation. Loss of capital or savings must be prudently guarded against.

Compounding effect

When one saves a fixed amount of Rs 1000 for 20 years and the other saves the same for 30 years, the difference in the amount available to them is considerable. Assuming a return of 12% annually.the amount becomes 10 lakhs in first case and 35 lakhs in the second.The difference in the amounts saved is only Rs120000/- over ten years but the compounded effect difference is of 25 lakhs.

Do Not Mix-Insurance and Investments

The basic purpose of insurance is to cover risk in case of any accidents or unforeseen eventualities happening. If this risk can be covered at the least cost, it meets the requirement. This risk is best covered by a suitable term policy, as the premiums are low and serve the purpose the best.

Whole life policies, taken for whatever reasons affect people in a manner to make them move away from their Financial Freedom.

Paying more for insurance premiums reduces their savings and thus their investments and these then are inadequate for their needs.

To Measure risk

1. Define Potential Risks and Financial
Consequences
2. Determine the Length of the
Exposure
3. Develop a Strategy for Each Risk
4. Set Priorities for Coverage
5. Monitor Risks and Coverage

Satisfaction Index

“I've made millions but they brought me no happiness." John D. Rockefeller

For measuring

satisfaction index to use is:

Satisfaction Index = (No of Desires fulfilled / Total No of Desires)*100

It is a function of both numerator as well as denominator. If you have six desires fulfilled out of twelve, you are 50% satisfied. Whereas with the same six desires fulfilled you are 75% satisfied if your total number of desires is eight and 100% satisfied if the total number of desires is six. The satisfaction depends on our attitude and outlook towards life and is definitely an inward looking concept. We need to focus on what we have, the glass half full and keep the total number of desires under control. Does it mean not being ambitious in life? No, I don’t think so. It is just a question of realizing that time waits for no one and we need to be happy and satisfied continuously as we get along with life, this moment and today while we look forward to a better tomorrow.

"Plan for tomorrow but live for today and make life an enjoyable journey and not a guided tour."

FINANCIAL FREEDOM COMMUNITY

sharing and caring to make a difference,and also contributing for a social cause.