It’s easy to gain weight – to add those extra pounds in no time. But it’s really hard to get back in shape. And it’s difficult because it demands discipline. Similarly planning your personal finances and keeping them in check is also challenging. Let’s understand this by making a Financial Planning & Health Planning assessment together.

Keeping something in order, always, is really a tough task. It is due to this reason that our portfolios are messed up. We get into too much of too many things and spoil the show. We might need only one pill for relief from the ailment. But we will take advice from all around and buy half of the medical store. Let’s stop this.

Let’s get disciplined.

Why don’t we learn Financial Planning in the context of Health Planning?

Financial Planning & Health Planning

The Basics

A healthy body is a result of a healthy diet. In planning a healthy diet, the first and foremost thing is to assess the blood sugar level and lipid profile to know what food is good and what should be avoided. The daily calorie intake should be within approved limits to maintain the biometrics in a satisfactory range.

Similarly, Financial Planning & Health Planning first requires knowing ourselves, more precisely our risk profile. It is the level of risk tolerance and financial capacity to shoulder the risk. This will yield a result as to what should be the ideal asset allocation one can afford in terms of including riskier asset classes in the portfolio.

One cannot slice away those extra pounds using a sharp knife, however, one can manage the future food intake to lose/gain weight. Investors cannot readily align their existing investments in line with the suggested asset allocation.  But gradually, this could be achieved through continuous rebalancing exercises. A planned approach to investments can help you in this.

The Surplus

There should be a fine balance between the calories we intake and the calories we use during the day. Excess calories, if not used up, will get converted into fat and unnecessarily deposited in the blood vessels and result in cardiac arrest.

The same is the case with the surplus after all your expenses lying idly in savings accounts. We should burn those excess calories efficiently to be healthy. Likewise, we should invest our surplus according to our risk profile, for a secure future.

And regarding the management of expenses, just plotting the last three months’ expenses can reveal the items where we can make some corrections. Expenses also include EMIs and credit card bills. Consolidation, restructuring or refinancing of loans can reduce interest expenses to a great extent. This will increase the surplus.

And this surplus needs to be invested wisely. Financial planning exercise includes ‘surplus management’ in relation to life’s financial goals.

The Risk of Unknown Factors

The word itself brings a frown on most faces. This is because we have not yet understood insurance in its real concept. Insurance is primarily meant for transferring the risk that one cannot afford. Do you mind contributing just 1% of your yearly income to make sure that your family’s needs are taken care of even in your absence?

A person should be insured enough to fund his/her child’s education, marriage, and family’s monthly expenses till the time their financial status gets to normalcy and to close any loan outstanding. Medical Insurance is a must for every family, perhaps more important than life insurance. The unfortunate will be those who have renewed their vehicle insurance but not their health insurance. A sound financial plan can help you analyze your insurance needs.

Now that you have learned your bio information, you can chart a diet according to your need – to gain weight, to lose weight, to get muscular or to recover from a physical ailment.

The Time & Returns

The significant thing here is that it is a continuous process. We cannot see results in a day or two. Some goals may take years of disciplined lifestyle to achieve, like weight loss. Same with financial goals.

Now, since you have understood your financial position in terms of monthly surplus, existing investments, loans, etc., you can set your life goals. One should set realistic goals within one’s working life span. If a goal falls beyond one’s retirement, funding the goal might be problematic. The goal amount and the return expectation should be in line with the surplus monthly availability of investable funds after expenses. Retirement planning, since it is a long-term goal, should be planned very prudently and with the utmost seriousness.

Since one cannot predict future rates precisely, returns have to be kept as conservative as possible and inflation rates could be assumed at current or higher rates to avoid shocks. Retirement planning is an indispensable part of financial planning.

The Reviews

In both Financial Planning & Health Planning review is necessary.

But do we need to check our blood sugar level every day? Not at all. We may check our medical info once a quarter. But that is a really important exercise. One cannot notice the weight loss on a daily basis but once a month the change will be evident. This review will help us in taking corrective actions and make sure we are on track with our goal. Financial goals are not different.

They demand constant monitoring in terms of corpus achieved, any shortfalls, portfolio re-balancing requirements etc. It’s not planning, but constant monitoring that plays the trick on reaching the goal corpus. It’s not a fit-it-forget-it game. But that does not mean that one should stay tuned every day. Just once in six months, have a review on the entire portfolio and finances.

Finally

Financial planning will help you to assess your financial position at a given point of time. It uses certain simple ratios (for e.g. debt to asset ratio which calculates how much debt you have in terms of assets you possess. If the value of your assets is more than your liabilities, you are more solvent and safer) which will give you a one-stop assessment of your financial health.

Fill the gaps, fix the issues, fall in love with life. Understand Financial Planning & Health Planning. It’s simple and effective.