Date: 16-01-2015 Why Do Financial Plans Fail? Name : Durai MJ Firm Name : JD WEALTH ARN No : 42018 City : CHENNAI NEVER HESITATE TO INVEST EVEN A SMALL AMOUNT “Failing to plan is planning to Fail”. You must have heard this saying thousand times since your school/college days. What does it really mean is that if you want to achieve anything in life then planning is a must………? I completely agree with it. However i would like to go one step forward and would say that along with planning, execution and monitoring of the plan is also equally important without which a plan would be just a plan on the paper and nothing else. Same thing is applicable to financial plan also. Now a days every now and then we keep on reading and hearing in television, newspaper, magazines about why financial plan is a need of the day and not a luxury. Because of this, at some point in our life either we create our own financial plan either on a do it yourself basis or with the help of an advisor. Once the financial plan is being created we are super charged and exited about our financial future as now we have more clarity. But after few days, weeks and months that financial plan goes to back burner. Why does it happens ? Why does the financial plan Fail ? Although you must have taken your financial plan from the top notch planner/advisor then also why that plan has not created magic in your life. So today i am going to discuss some of the reasons about the failure of the financial plan. Note: Ideas and some content of this article has been taken from the book 11 principles to achieve financial freedom (wriiten by Nandish Desai) and You were born rich (By Bob Proctor) 1. Lack of action:The bridge between a financial plan which is on paper and its ultimate result in the investor’s world is ACTION. Let’s see the number of actions required to be taken by a investor 1. Buying of different financial instrument which could be mediclaim, term plan, mutual funds, direct stocks, real estate etc. 2. Attending some seminar on personal finance or reading of books related to personal finance. 3. Maintaining budget may be once in a month or quarter. Most of the investor keeps on postponing their action with regards to their financial life by saying that they will take the action SOMEDAY without realizing that SOMEDAY is a code for NEVER. 2. Always looking for perfection: To execute a financial plan, one has to channelize his/her money into different financial instrument like stocks, real estate, health insurance, term plan etc. When investor start shopping for these financial products, they are looking for a perfect product without realising that the moment you are looking for perfection you become a fault finding machine and you will find one or the other reason why a financial product is not good which makes you passive on the action side. In my view there is nothing called “perfect financial product”. Either you pay less price for a product with lesser value or else you pay a higher price for a product which provides you much higher value. 3. Non supportive money habits: The word habit means “those action which you take unconsciously on a daily basis”. People fall into three categories with respect to finances: A. Deficit position (in debt): In the habit of spending more money than they earn. B. Break even position: In the habit of spending everything they earn. C. Surplus position: In the habit of spending less money than they earn. If i ask you what an investor should do if he wants to come out from “deficit position” to “surplus position”. Most likeliest answer would be to start earning more income or to reduce the expenditure. But that’s where the catch is. For example: An investor is earning Rs.50,000 and his expenditure is Rs. 60,000, thus he is in a deficit of Rs. 10,000. The most common advice which this investor would get is either increase his income or reduce his expenditure. Let’s assume for the time being his income becomes Rs. 70,000 per month. Now, inspite of increase in income, this investor will not come under surplus position bcz since he is in a habit of spending more than he earn so unconsciously he will start spending more than Rs. 70,000. So if you want to be in a surplus position, you have to maintain your budget on a monthly basis and stick to it come what may. You need to stop buying things just for immediate gratification and start buying things out of genuine need only. Also to come out from your deficit position, you need to shift from the mindset of a SHOPAHOLIC to a SHOPPER. A shopper go into a store to buy something where as a shopaholics go to a store to see if there is anything to buy. 4. No clear understanding of “Power of One” concept: Let me explain the “power of one” concept with the help of an example. In a dark night with no street light and with a lamp in my hand, I have to cross 100 miles. How will i do it ? What i do is the lamp in my hand will help me to see a distance of few meter. So i just walk that few meter. Again after crossing that few meter, my lamp will help me to see another few meter. Thus slowly , i will be able to reach my destination of 100 miles. But at any given point of time, i was not able to see the destination with the help of my lamp. What i did was without worrying about my destination i just took one step at a time. This is what is “Power of one” concept. Similarly to achieve your financial goal, you need to take a list of actions. But just don’t worry and start taking one step at a time. With each step you will be nearer to your financial goals. 5. Lack of proper system: How much wealth you create in your life is not a function of how much income you earn rather it is a function of what system you follow in your financial life ? A system is a process which keeps the things in moving position even in our absence. For example: most of the companies are spending crores of rupees in designing a system which takes care of everything. If you are an employee of such companies and you remain absent for few days, that doesn’t mean that the company stops working. But it is the system being created which is taking care of the company. In case of financial investment, many people operate from their moods and feelings. If they feel good, they invest or else vice-versa. So to avoid such situation you need to keep a system which helps to distribute your salary/income as soon as it is credited into your account. For example: 20% of your income will go as a long term investment through SIP in mutual funds, 5% of your income will go as a premium for your different insurance policy, 35% will go as an EMI etc. Just make sure that you have such system in place and keep on refining it depending on your requirement. 6. Missing wealth environment: Your attitude towards your life depends a lot on the kind of environment you have been living. When you attend a motivational seminar or read a motivational book , how do you feel ? Definitely you feel very positive, motivated and feel like doing something extra ordinary. But after few days either you will be back to your normal life or if at all you are still feeling positive and motivated then the intensity of positiveness and motivation will be much lower as compare to earlier one. This happened because when you read or attended a motivational programme , the environment itself became full of motivation. Similarly to achieve your financial goals and to create wealth you need to be in a “wealth environment”. To be in a wealth environment, following few things can be done. • NEVER HESITATE TO INVEST EVEN A SMALL AMOUNT • START EARLIER • GIVE IMPORTANCE TO YOUR INVESTMENT AND GIVE TIME FOR IT If you feel there are some other reason as well for the failure of your financial plan, do share it call me at 9841438724/9042038724 or mail:jdwealth@outlook
Posted on: Fri, 16 Jan 2015 02:01:31 +0000
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