How strategic personal finance management can help pick the most suitable investments for you


What does the unknown and unexpected do to us? Are we thrown off balance, unable to decide? Are we so unsettled that we do not know what past experience to draw upon to deal with a new situation? Or, do we love the surprise? Do we enjoy the adrenaline rush and the freshness of the new? Personal finance is personal, because each of us responds differently to the unexpected. What is the right thing to do, is the oftasked question. There is no single satisfactory answer. Don’t spend your income, some will say; put aside some for a rainy day, others will add. Some will fail to visualise what a rainy day might look like and so fearing it would seem foolhardy to them. From among all the advice about goals, retirement, early saving, investing right, risk preference and disciplined investing, how do we choose our path? How do we stick to it? Where should we begin? Strategic personal finance requires investors to think deeply about their financial lives, and set themselves preferences about how they would like to play the game. It is strategic because it considers both actions and consequences. It is not a whimsical orientation that seeks to live the good life without the effort to earn the money to support it. First, have we identified what we want our money to do? What purpose would it have to fulfill to satisfy us? There is a hierarchy in play here. We seek safety and security for ourselves and our family as a primary survival goal. After having enough to meet the basic needs, do we know what we should do with the surplus? Our spending habits are dictated by our strategic orientation about what is important to us. To some, keeping up with social circles is so important that spending on partying, clothes, gadgets and travel is something they have to do. To some, the lure of interests is so high that they have to spend on it regularly. To some, giving is the primary purpose of the surplus and they have to pursue charitable activities. Make sure you have enough for what matters most to you. Second, how do we behave when there isn’t enough to go around? How willing are we to make sacrifices? Do we choose denial instead? Do we borrow to make up? How do we make choices when we fall short? Our saving habits are driven by our strategic choices around money as a limited resource. If we dislike falling short, borrowing, or asking around, we willingly set money aside for the future. For an unknown eventuality that might need us to draw upon our savings, we create a buffer. Third, how accessible do we want our savings to be? Is being able to draw on it at short notice a comfort we need? Or do we want it to be locked away out of sight so we are not tempted to access it? Do we like checking what is going on? Or are we willing to let it lie and be confident that everything will eventually work out fine? Fourth, how well do we stick to plans? Are we able to implement and execute ideas? Are we able to respond to events as they unfold and make tactical changes as needed?

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Date: 2018-11-19 16:24:06