Who doesn’t want to become wealthy? By wealth here, we mean, the financial independence to do anything in life.Now, let’s say, you already have a financial plan to manage your investments and create wealth. However, over a period of time, you realize that you have not been able to execute what you had planned. Why? That’s because, planning is easy, execution is difficult. Let us tell you the a few reasons why managing investments or executing financial plan becomes challenging and how to overcome them.
There is a vast difference between saying “I am going to do it” and “I have done it”. There is no use of making a financial plan if you don’t work on it! You may keep postponing your investment for some reason –, the market conditions are not good or you are waiting for your next salary. The more you delay, the more you lose on the time to grow your money.
One of the golden rules of wealth creation is to start investing early so that the power of compounding and rupee average costing can multiply your money. Time is equal to money, so don’t waste any financial opportunity just because you feel the ‘time is not right’.
2. Short Term Perspective
Most investors don’t look beyond immediate or quick returns. Investing in short term instrument or investing a large sum for a short term is not a bad decision per say, especially if you need money to meet near future goal such as buying a car. However, when the trouble strikes when your short term investment matures, you are not planning to spend it and then, you forget to reinvest your money!
Wealth creation requires patience, so you need to keep a long term horizon. Choosing long term investments such as wealth plans will ensure that you are disciplined for the longer period.
3. Financial Illiteracy
Whether you believe it or not, your lack of knowledge about financial planning and wealth building tools could be one of the reasons why you can’t stay committed to your investment. The Global Financial Literacy Survey conducted by Standard & Poor’s Financial Services LLC revealed that around 76% Indian adults do not adequately understand the key financial concepts. They did not know the meaning of terms like risk diversification, inflation, interest and compound interest.
If you are not sure about how the financial affairs work, you would always remain apprehensive about where and how toinvest wisely. Financial knowledge will empower you to take sound investment decisions, and stay away from the herd mentality. Read financial articles, listen to experts, talk to like-minded investors or take advice from professional wealth advisors to become financially literate.
4. Incorrect Mode of Payment
Mode of payment can also be one of the reasons why you are not disciplined. Let’s say you have taken a life insurance policy or a home loan. Now, if you opt for a non – ECS mode, you have to rely on manual or automated reminders to ensure timely investments (premiums) or payments (EMIs). At times, even though you know your premium or EMI is due, you either miss the due date or delay it out of sheer laziness. The result? Your insurance policy may lapse or your outstanding liability will increase, whatever the case may be. This could break the continuity of your financial growth.
It would be a good idea to avail ECS option so that your due premium or EMI is automatically deducted from your bank account. Also, since you know that an ECS bounce would affect your financial credibility and attract penalty charges, you will take extra care to keep your bank account adequately funded around the due date. Until you give instructions to discontinue ECS, the deductions will continue to happen on their own, making you a disciplined investor by force.
The key to become a disciplined investor is not letting your shortcomings come in the way of your financial goals. Identify which factor is preventing you to do so and work on it accordingly.