PersonalFinancial Planning in India is like a T20 match, after losing so many wickets we realise it’s a Test match cricket, but still do not act and generally end up losing a lot.
Off late we surveyed few middle-income working professionals in various age groups through a casual conversation and asked them how they do Personal Financial Planning, this is what they had to say in general,
25-30 years ‘We like to spend, we invest to save tax’
30-35 years ‘My dad does it for me, My friend advises’
35-45 years ‘We manage on spread sheets; we have few advisors from our bank who provides us an app also’
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The summary outcome of above is,
Primarily tax deduction is driving savings for the large millennial population
Changing lifestyles and habits resulting in high spends and negligible savings
Resort to family, friends and financial services brokers for making investment
Overall, Financial Planning and Management is an alien concept and is being used very loosely to drive financial investment by sellers of financial instruments. Due to the above approach, the key aspects of Personal Financial Planning are completely missed out while saving and investing – Purpose, Systematic allocation, Duration, Risk, Returns, Liquidity and Tax – resulting in financial stress arising in following situations for the individuals,
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Medical emergencies in the family
Job losses
Death of bread earner
Requirement of large sums at a point, for meeting key future obligations like education, marriages, construction
The above situation leads to a very low penetration of Personal Financial Planning profession in our country and these professional services are being provided or used primarily by High Net worth Individuals and family offices with large wealth pool depriving a 300 million strong higher to middle income group of our country that is driving consumption, investments and is a key tax contribution today. It ultimately suffers because of misguided and poor financial decisions. Financially stronger higher to middle-income segment will give them opportunity to achieve greater things in life. It’s time that Financial Planning and management assumes importance, digital tools are available that allow this segment to self-plan, provide unbiased advice and manage their savings in most sensible manner with purpose and all other important aspects of investing as mentioned before.
Any time is a good time to start and as they say ‘Wealth can set you free’
The author is CEO and Founder, Mowize, a Virtual Financial Assistant
