Saving money is a big challenge for individuals — 57 percent of those surveyed saved less than 20 percent of their take-home salary, and 24 percent did not save at all. This was mainly due to lifestyle expenses, big loans, and simply not having a savings mindset.
Planning for financial goals continues to be the biggest challenge for salaried Indians, according to a survey conducted by Finsafe India, a financial education company. The survey was conducted among 1,364 salaried employees.
Unprepared for financial emergencies
The survey highlighted the lack of financial planning in India. The salaried tend to rely solely on employer benefits and are unsure if they are planning correctly for their goals.
For instance, 48 percent of those surveyed found planning for financial goals to be their biggest financial challenge, while 42 percent said they would not be able to meet their expenses if they lost their job.
Supporting elderly parents and paying for medical expenses were bigger financial worries than not being able to repay loans, especially credit card debt.
Forty-eight percent of the respondents said they relied on employer-provided medical cover, but were not sure if that was enough, and 23 percent were not prepared for medical emergencies at all.
While 44 percent of the respondents invested in equities, debt investments like fixed deposits and insurance policies were popular among 36 percent of those surveyed. About a third of the respondents (34 percent) did not invest at all as they did not know where to invest.
Financial planning, mutual funds, and taxation were topics that investors wanted to learn more about.
Savings, which is the foundation to building wealth, is a big challenge for individuals — 57 percent saved less than 20 percent of their take-home salary, and 24 percent did not save at all. This was mainly due to lifestyle expenses, big loans, and simply not having a savings mindset.
Low on SIP, high on Bitcoin
While the reach of mutual funds is widespread and Systematic Investment Plans (SIP) are seen as a good way to invest, the allocation (as part of the overall portfolio) remains low. Younger investors are chasing high yielding (and higher risk) products like P2P (peer-to-peer) lending, company fixed deposits aka non-convertible debentures (NCD), stock baskets, etc.
Aggressive investors do not look beyond returns and investment risks take a backseat. Conservative investors value safety of capital over beating inflation. The net result is low savings, or investing in non-inflation beating and / or high risk products (where the risk of capital loss is high). This inhibits wealth accumulation, and leads to a host of other financial challenges.
While there exist many tools and platforms, nothing can beat a customised financial plan designed by a human advisor. A financial planner takes into account emotions and preferences while making a plan. Investors are more likely to follow such a plan over system-generated suggestions.
New financial year, new goals
The beginning of the financial year is a good time to evaluate one’s finances, and below are a few questions that need to be answered to make the assessment.
· Are you saving at least 30 percent of your take-home income?
· Are you adequately prepared for uncertainties? Do you have 3-6 months of emergency cash and at least Rs 10 lakh of health insurance?
· Is your overall portfolio return beating inflation? What is the risk in the portfolio?
· Is your total EMI less than 30 percent of your take-home income?
· Do you have a financial plan?
A financial plan is an absolute must for every individual. It guides an individual on the path to be taken for managing finances as per one’s goals. A financial plan also helps you put in place the behavioural discipline required to reach your financial goals.
Take control of your finances today if you don’t want to be its victim tomorrow.