What is life strategy? Its the strategy of your life; financially speaking of course. It is as simple as this or as complex as you can imagine it to be. It is exactly how you imagine your life to be,again financially. There are two aspects that constitute a life strategy the elements or ingredients and guiding principles. The elements of your life strategy are nothing but your financial goals such as; I want to have R 2 crore worth of assets by the time I am 40 years old,I want to be able to have about R 50 lakh for my children,I want to have a farm house worth R 1 crore today in the next 20 years,I want to have an international holiday every six months,so on and so forth. You manage this by doing financial planning. Now while you do financial planning for the above,there are certain other things that facilitate the fructification of such planning endeavour. These are what I call guiding principles. Together they fuse to formulate your life strategy. Just like the way a country has directive principles of governance it might be a good idea to make a little handbook of guiding principles for us to follow through. The fundamental objective of such principles is to remind yourself especially in not so good times,that what you are doing is right and things must be done in this way. In better times it is to confirm to yourself that your theories worked out really well. The outcome from this is a sense of financial discipline which you develop and which can potentially transgress from one generation to the other. In simpler words,these are the things that you can teach your children. These principles can be a mix of wishes,desires,decisions,observations,learnings and operational methodology or just about anything that you feel is important to your family,financially speaking. There is no set pattern of such principles and thus I urge,you make your own. The following are some isolated examples and they are not interlinked. Financial Decisions * I want to be able to save at least 40 per cent of my income * I want to keep my expenses at 25 per cent of my income * At any point I will keep 20 per cent liquid money so that I can attack any investment opportunity * The option I choose for 80 per cent of my assets should be the best return producing asset class. * Not to pay anything in excess of R 25,000 pa for life insurance as most likely it will be a wrong recommendation * In order to plan retirement,never consider fixed annuity type of policies. * Any investment that I do,I must earn a rate which is 2 per cent higher than average inflation of last 5 years. Operations * I want to have all my payments electronic and automatic with preset limits. * Everything I do,should be easy to manage and administer * Correct the wrong decisions and never take wrong decisions again. * Financial matters must be organised well so as to never get into a financial mess like loans etc. * Skip advice on things I do not understand,but do self learning first so as to not miss out on anything important * If I hire someone,then to ensure that the person is ready to answer all questions and give reasonable time * A refresh of 6 months might be a good idea for portfolio. Desires * I want my home expenses to be on auto pilot ie,I want my investments to fund all expenses and then it does not matter whether I work or not. * There should never be a compromise on lifestyle ever and solid control over financial matters * Make investments and wait till they multiply three times before I consider selling Learnings * Provide time commitment to learn financial management. * Study all asset classes or product categories * Make a list of investments that delivered over 15 per cent over the last 5 years and over the last 10 years. So on and so forth Thus,when you make a start to planning your life; eventually you will land up having a life strategy. It might be difficult to start off on your own but over time,things will crystallise and you will have a better understanding. Over time if you keep practicing this,you will perfect your life strategy. Author is Director,Transcend Consulting kartik@transcend-india.com
