HindustanTimes Mon,29 Dec 2014

Save for the rainy day

Sandeep Singh, Hindustan Times  Mumbai, December 30, 2010
First Published: 21:31 IST(30/12/2010) | Last Updated: 22:09 IST(30/12/2010)

The global economy is rebounding and India’s growth is looking good, but what should you be doing? With uncertainties around rising oil and commodity prices and talk of rising interest rates, thinking long-term is a smart thing to do in good times.


So, the big question: do you have a real financial plan? And if you do, is it good enough to secure your future? With lifestyles getting better, preserving them is a different challenge.

Experts say a plan must be in place to meet your objectives and it must be revisited regularly and changed to suit the environment. “Inflation is a big concern for 2011. While depositors are likely to gain with an expected hike in interest rates, borrowers will get affected. So one must plan appropriately,” said Surya Bhatia, a Delhi-based financial planner.

Inflation can really bite into your plan. For example—If today at the age of 30 you need Rs. 20,000 a month to fund your living, at a conservative average inflation of 4 per cent, you would need Rs. 64,867 at the of 60 to buy the same goods and services. If inflation is higher at 7 per cent, that would jump to Rs. 152,245 (see table).

So, what should you do? Equities are the instruments that have the potential to generate above-inflation returns in the long term  but they remain volatile. So it would be best not to look for equity highs in 2011, but invest in stocks nevertheless for long-term benefits.

Even conservative investors should look for a moderate exposure into equities. Prudent investors balance between assets such as equities, debt instruments, real estate and gold. Nothing can match disciplined investment; even small amounts invested meticulously can help you achieve financial safety, security and independence.

To start with experts advise for adequate insurance cover that can take care of all your liabilities and your family’s lifestyle even if you are not around. In addition, you must identify your short, medium and long term goals with a timeline and invest separately for each so that they do not interfere with other.

While short-term goals may include a vacation or shopping needs, medium-term goals could involve a down payment to fund a home or a car. Long-term goals include retirement and education of children. Traditionally, marriage expenses of children was counted in this category.

The big one eventually is retirement. Thinking for that is best done when one is younger. As they say, save for the rainy day.

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