Description/ Specification of Financial Advisory Services

Managing personal finance is one of the Most important aspects of a person’s life. But it is a matter of fact that very few persons give a serious thought to it or adopt a structured approach. Result is that often we are in short of funds, when we need it the most. The reason for this fund requirement can be a major health breakdown, expenses related the children’s study, or fund need during retired life. During such critical hours we may frantically search for getting it, and perhaps solve the crisis by taking high-cost loans. Therafter, the remedy becomes worse than the disease, leading to further into the so-called debt trap where one borrows to pay only the interest for the existing loans. However, a disciplined management of finances can easily avoid such stressful situation. We will discuss about it here in more details. Managing personal finance should start with the creation of a monthly and a yearly budget and monitoring the expenses vis-a-vis the same. One can prepare the budget in a simple excel sheet with a space allotted for each month. The major expense heads should be mentioned row wise, and the total of rows added below to get a monthly budget. Below that there should be a cell to mention the actual monthly expense. In the same file another tab should be kept holding the yearly summary budget by summing up the monthly budgets for each month. The budgets versus actual expenses will give the monthly deviations which will be summed up to get the yearly deviation. This data will highlight the gap between budget and actual and also between income and expense and will form the basis of control of expenses. This is extremely vital , since this is the way to save for future and extraordinary needs. If the expenses are less than the income, then the gap can be saved and invested. But if expenses exceed the income, then it will either eat away the resources or will cause borrowings. Both are extremely harmful. In such a situation either expenses are to be reduced or income has to be increased or both. We will now explore these options one by one. First let us look at how to control expenses. Some of the typical component of expenses are interest on various types of loans, Electricity bills, telephone bills, club memberships, Transport, Grocery, repairs and replacements, Medical expenses, education expenses to name a few. The first thing to be taken up is payback of loans, starting with the costlier ones. Credit card loans are amongst the costliest ones, so they should be paid back first, followed by others with relatively higher interest rates. While housing loans are usually of large amount , they often provide tax shelter in the form of deduction of interest and principal amount from the income. So that point has to be taken into consideration. This will reduce the monthly expense to a large extent. There may be membership or cell phone connections which are seldom used. Closing them will reduce some expenses. As far as transport is concerned, one may consider clubbing vehicle trips to and from office with some of the colleagues who stay in nearby areas. This way, there can be very substantial savings in fuel bill and hence transport cost. Coming to electricity bills, one can consider rooftop solar installations , if there is opportunity for the same. The investment will pay back in a few years, and one can make some earning selling the surplus electricity to grid. There are many professional parties who can help in such projects on a turnkey basis. Another way to reduce electricity bill is to replace old ACs with star certified inverter ACs which are energy efficient. This can substantially reduce the electricity bill, although it will require some initial investment. Medical expenses can be sudden and can cause extensive financial loss. Here the old adage that “a stich in time saves nine” has to be kept in mind. To be on a safer side , one should invest in one’s health and family’s health by following regular checkups and exercise routines. Keeping a medical insurance for self and family should be considered as a must to tide over any actual emergency. Coming to the earnings part, one can consider taking up some part time job in spare time. If one prefers working from home, then there are various opportunities in internet to earn money including those through the freelancing platforms. If one has command over one particular subject or skill, then one can provide tuition via online or offline mode. One can also consider additional investment , if one has some spare money in bank. There are various investment opportunities available via shares, Mutual funds, precious metals, bonds, fixed deposits etc. Based on one’s risk appetite, one can choose suitable avenue for regular income and/or capital appreciation. This way, by using the two-pronged strategy of expenses reduction and income increase, one can garner free funds. This can be deployed to earn income in future or post-retirement, or to save for large fund requirements like children’s higher education, marriage etc. You should keep separate funds for each such life goals and keep target to build a certain corpus over a period of time. Please note that this is not a professional financial advice. To get a professional financial advice , contact a certified professional financial advisor.