Photographs: Uttam Ghosh/Rediff.com Ramalingam K
You have got 365 days till next Diwali. And exactly as many days to chalk out a plan and become richer than you are now by next Diwali.
The good thing is you don't have to employ some highly esoteric investment strategies or complex algorithms to become richer in a year's time.
Some simple reorganisation in your personal finance management could make you richer. Almost always, the simplest are the most profound.
To be financially successful, the following three steps are important.
1. Make a financial plan
This is the first and foremost important step to become financially successful. It is not your income, but your wealth that counts. People with high income like Michael Jackson died with a lot of debts. So a careful personal finance management is more important than how much you earn.
To have an effective personal finance management system in place for you, you need to have a personalised well-written financial plan.
What are the things you want to save and invest for? It may be for buying a home, buying a car, children's higher education, retirement planning.
Decide how many years from now you need to achieve each and every goal. Because you need to take into consideration the inflation for all those years and also you need to choose investment options based on the timeframe for investments.
You need to create your own list of financial goals. If you don't know where you are going, you may end up somewhere you don't want to be. To end up where you want to be, you'll need a roadmap, a financial plan.
So create a financial plan for you and your family this Diwali. There is a lot of help available for you online to create a financial plan on various web sites with financial calculators. But if you want to create a more workable financial plan, you may seek assistance from professional financial planners.
Ramalingam K, an MBA (Finance) and certified financial planner, is founder & director of Holistic Investment Planners (P) Ltd (http://holisticinvestment.in).
2. Pay off all high interest debts
You need to create a plan to come out your high interest debts like personal loans, credit card outstanding, car loan and the like.
Credit cards can make it seem easy to buy expensive things when you don't have enough cash. But it is not free money. To come out of debt, you need to have specific strategies that can work in your own situation.
There are 11 ways to get out of debt and stay out of debt. You can choose one or a few ways from this to become debt free.
If you are not giving enough attention to your debt, then it can sink your financial ship. So take some time on this Diwali to list down all your borrowings and make out a plan to come out.
3. Start saving and investing
As soon as you have paid off all your high interest debts, you need to start saving and investing for your financial goals. To save more either you need to spend less or you need to earn more. So you check up what are all the ways and means available for you to spend less and earn more.
If you are spending more than your income or all your income and you don't have any money left to save or invest, you need to look for ways to cut back on your expenses. When you check where you are spending your money, you will be surprised to know how everyday petty expenses that you can do without add up over a year.
You need to understand what makes us spend more and strategies to have self control with money to spend smart and save more.
When you started saving money, you need to convert your savings into investments. When you are choosing your investment option you need to take into account, the timeframe for investments, risk you can afford to take, inflation and your financial goals.
Also you need to be careful in avoiding some big investment mistake. That is to choose a scheme in sync with basic investment principle. Make sure that you are not violating any investment principle. Don't fall for speculative gains or Ponzi schemes and get rich quick schemes.
If you follow these simple steps, by next Diwali you will be richer than what you are this Diwali. Then you can celebrate next Diwali with much more confidence and peace of mind by following these simple steps for financial success.