Robert Zend, poet and fiction author said, “People have one thing in common; they are all different.” If you look around, you will find truth in the statement. People are different in the way they think, behave and have different habits and opinions from one another. For example, one person might like to read books the whole day and the other can fall asleep trying to read a book in a matter of few minutes. People think differently and therefore the stock market has its ups and downs. One person might be thinking of selling a particular share at a certain and another might want to buy the same one. ABC view could be that there is more potential for that share price to rise higher – CBA thinks exact opposite. (& both of them think they are smart – that’s common)
As each person is different, the financial planning for each person would also be different. There is no one common template that everyone can use. Let us look at how people are different from each other in the financial world.
People who set financial goals versus People with no set financial goals
You can be successful in life only if you know what you want to achieve and then take action to achieve set targets and measure performance against set goals. Similarly in your financial life, you have to set short term and long term goals. You will then work towards them. If you do not set money goals, you will have no idea on how much you are saving and spending. You will not take any concrete steps to make your wealth grow. If you do not have a clear idea of what to do, you will be struggling with money issues.
Infographics – Maslow’s hierarchy of needs & your financial goals
Conservative Investors versus Aggressive Investors
There are different types of investors. Some like to take more risks with their money. Some are more inclined towards preserving existing wealth. You cannot copy anyone else’s investment style as each person is different and in a different stage in life. You can measure your risk profile and decide your personal investment strategy along with the financial planner. If you are younger, you can have a more aggressive investment strategy than when you are in your late 40s. You should be comfortable with the investment strategy else it will give you sleepless nights.
People investing based on research and People investing on tips
Do you invest based on your research or educated recommendations of your financial planner? Are you a person who follows market tips from friends, bloggers and neighbours? Each person is different. It is best to invest based on research and analysis rather than blindly following tips though sometimes you might make money on tips but it is leaving too much to chance.
Infographics – Financial Planning
Savers versus Spendthrifts
Some like saving money and some people are spenders. It is good to save money but you cannot live like a miser and not enjoy life. At the same time spending all your salary in the first week of the month is foolhardy. Some people save a decent amount and think they are doing a good job. But inflation eats into the value of your money. People who invest what they save will have a better financial future.
Must Read – “I need it now” syndrome
Different types of Financial Planners/Advisors
There are many people who are supposedly financial planners. But all are not planners. Some do not have comprehensive knowledge on all aspects of planning. Another financial planner might just invest your money in a few products in the market like mutual funds and shares and leave it at that which is not enough. Another set of financial planners will assess your wealth, your current situation, your goals and create a diversified portfolio of many investment products. They will be in constant touch with you, revisit the plan and the portfolio regularly and make required changes. Which financial planner would you choose?
Can you classify yourself into one of the above mentioned categories? It is important for you know your characteristics, strengths and weaknesses. You should plan your finances and your life on the basis of this. You should not blindly copy the planning and strategy that works for one person just because it worked for that person as the same might not work for you.