Planning for your child’s future

Now a days every person concentrates on their career and while concentrating on one’s career, marriage takes a back seat. So what happens is marriages are late and therefore by the time the child is born, the couple is already in their late 30’s or early 40’s. What happens is late 30’s or early 40’s is the time when one starts having major expenses of one’s life and as one was concentrating on his or her career, investments had taken a back seat. Now with a child on the way, pressure starts building. Instead of being in a happy state of mind, you start getting tense, as expenses will start putting more pressure on you. This is why financial planning becomes important at any stage of one’s life. If you are one of these parents who married late, start planning now.

Education expenses are rising and will keep rising all in the name of better education and giving your child a better future. Giving your child a better future comes at a cost and this cost should not cost you your health. So start now, first thing is make a list of your expenses and see which expenses can be dispensed with. Now save this amount. Cutting down costs will increase your savings, which you can invest. Plan your investments as per your goals. What I mean here is, plan when you would have major expenses on your child’s education e.g. after 12^th standard i.e. at the child’s age of around 18. So if you have enough time go for SIP in long term equity mutual fund, but if the period is small, go for safe returns, as you would not want to lose money. As the returns would be low, your savings would have to increase to reach your short term goals.

Take a term plan to cover your child’s future aspirations. So if anything happens to you, your child will be taken care of. Now comes the tricky part, since you married late, your expenditure for child education would be there even when you retire, so you need to plan for a second career, even after retirement. This will make a big economical difference to your life, after spending so much time on your career in the early stage of your life. Last but not the least make nominations or write a will, since your child will still be very young if something happens to you, even after retirement. You would not like your child to spend his/her life being conned or fighting a legal battle, when he/she should be concentrating for his/her career.

You brought your child into this world, now it’s time for you to make him/her happy. Plan now.

Secrets to making money

If you are interested in making money, you need time on your hand. The longer you invest your money, the better your chances of making money. One of the most important things we keep hearing is the power of compounding, by compounding we mean, making money on the earnings which get invested. So to gain from the power of compounding, you need to have a longer time horizon. Historically, the stock market has always gone up, there would be short term volatility as it is now, but long term it would always go up, so go for equity. If you are not sure where to invest, go for a good equity mutual fund with a good track record. If you find that investing in stocks is risky, go for asset allocation. Asset allocation means spreading your money over different classes of assets.

Remember, when you spread your investments over different classes, your returns would come down, so do your asset allocation according to your goals and risk appetite. Liquidity should also be considered, when we do asset allocation or for that matter any investment. You should keep aside some amount which will be risk free and available at any point of time. As we said earlier, in stocks there could be short term volatility, so if you require money soon and the market is down, you could end up losing some of your investment amount as well. When you keep your investment in risk free investments, the returns would be lower as compared to stocks. The best way to invest in a stock market is through a SIP i.e. systematic investment plan, this helps in cost averaging. This is the main reason why most of the financial advisors advise you to go for SIP.

If you have been reading my posts regularly, I had mentioned about buying and holding a stock. By buying and holding, I had mentioned that in such cases, keep reviewing on a regular basis. Buying and holding, did not mean buying and forgetting. Market conditions keep changing and if the stock you had purchased has no value in the current market, you need to get rid of it or else you can forget your money as well. Follow the above rules and move ahead to making money and as you reach closer to your goal, move your money to risk free investments and enjoy yourself after that. All the best.