Well, frankly speaking you don’t!! Provided you have the time to study how to analyse your financial health, how to devise the right financial plan and how to ensure that you stick to your plan!! But then again, in case you can find that time, patience and energy to study so much – you don’t need a doctor either. You might as well study our physical anatomy and do away with the need for a doctor. And in fact most of us do precisely that!! We read a bit about good health on the internet and bit from friends / relatives and… eureka… we all think of ourselves as a doctor. We start diagnosing ourselves and our relatives, we start prescribing medicines for ourselves and our relatives and then?!! Then we suffer.. more often than not, we damage our health.. sometimes we cause some serious ailment and rarely (but certainly) we cause irreparable damage to our health. And why?? The reasons are simple – either we did not have the time to go to the proper doctor or we lacked the patience to sit in the waiting room for our turn or perhaps we thought going to the doctor would be a costly affair. But there are one more category of people – and these constitute the majority of us – the well-read, educated people. We are somewhere in between the two class of people already discussed – we do think that going to the doctor as a time consuming and costly affair but at the same time we also realise that it would be foolish to study for ourselves. So we device the third route – we rely on the pharmacist. After all, he deals with the medicines all day long and is “supposed” to know what he sells. Besides, the pharmacist will only charge for the product (i.e. the medicines) and not for the advice after all.
Well, as logical as this hypothesis sounds, there are some basic flaws in the whole theory which we fails to reason with ourselves:
- If it was so simple, then why on earth would a person spend good 5 years of their life and half of their parent’s life spending on becoming a doctor?
- If the pharmacist earns his income from the sale of medicines why on earth would he not sell us the medicine on which he has higher margin rather than the medicine which is more suitable for us?
While none of us will have a good and convincing answer to the above questions, we would still like to continue to live in a fool’s paradise and would prefer that either us or at max the pharmacist knows what is best for us!! This unfortunately is the sad truth.
Further, we all agree that just like our physical health, it is also imperative to be financially healthy. In the real world, one would also agree that at times it is more important to be financially healthy than to be physically healthy. However, somehow in the order of priority we fail to recognize the importance of the financial health and this is where it starts getting messy and sooner rather than later we find ourselves in the notorious rat-race. Struggling too hard to be financially sound and yet not able to see the savings in our portfolio. As much as we would like not to believe, the reason for our poor financial health is precisely the same as the reasons for our poor physical health: We choose to either rely on the our own inference and analysis (based on the half-baked knowledge that we acquire from the almighty internet) or at best we rely on the opinion of the pharmacist (who come in the form of a retired relative who happens to be a LIC agent or a friend who happens to have joined the sales force of a private insurance company just because he could not find any better job)!! The problem is we do not realise that:
- The agent is not a Financial Planner – he / she will select the products which gets them more commission rather than the ones which are more apt for your needs
- The recommendations quite often, will not be based on any analysis of your needs – in fact his/her knowledge of financial instruments, quite often, would limited to the products of the company he / she represents
- Quite often you will end up investing a big chunk of your investible surplus in to products which are absolutely irrelevant for your needs and might not give you any returns and at times erode your principal
- Reversal is not easy and certainly not cheap – The problem with some of the products is that once an investment is made, your funds not just get blocked, but you are required to make consistent periodic investment. Not making these regular investments might invite penalties. Pre-mature withdrawal is either not allowed or if allowed is after deducting the lethal charges.
In contrast to this, the right thing for every person who wishes to have a good financial health would be to:
- He/she should approach a good financial planner
- The financial planner should help him/her to define the specific financial goals and retirement goals
- The financial planner should devise a robust financial and retirement plan
- The financial planner should advice the client on the appropriate investment instruments which are suitable to the needs of the clients and will help him/her achieve her financial and retirement goals
- The financial planner should review and appraise the client on the financial progress periodically and should modify the plan whenever there is a change in the financial goal of the client or if necessary due to some other conditions.
As we can see from the above guidelines, the financial planner plays a very important role in ensuring that you are financially fit and healthy. The cost you would pay by not taking proper advice from a financial planner – and by relying on the internet articles or chai per charcha with friends / relatives – would be almost certainly much more than the fees you would pay to the financial planner. After all health is wealth… and more so financial health indeed is wealth!!
Wishing you a very healthy financial life,
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