Do you love a life of luxury? You need a well-executed financial plan; here’s how to do it

A team of academics is said to have conducted a goal-setting study on Harvard Business School graduates in the 1980s to ascertain the influence of planned and documented objectives on future outcomes. The apparent surprise is that only 3 per cent of the class, who had specific goals and a strategy in place, were making 10 times as much as the others. 

Although this analogy is sometimes misused, it conveys a strong message: Having well-defined objectives and a well-thought-out plan will help you attain a success rate of 100 per cent. 

You ask me what this has to do with this article here. 

Financial planning is vital for achieving any objective in life. You won't have to give up your lifestyle if you have a solid financial strategy. You can accomplish your objectives and maintain a respectable standard of comfort. 

When you have a good financial plan and take action accordingly: 

Your success rate becomes tremendously high. 

You can achieve more than what you wished for with the same amount of money because your money gets allocated to the right set of treatments. 

Right Application of Products- For instance, if you buy products in an ad-hoc manner, you might think of buying an equity fund to fund a short-term goal, which wouldn’t work. But if you work according to your plans, it will help you segregate your money and target the right set of products. Let’s say you have a long-term goal of buying equity funds, and you target your short-term goal of investing in fixed deposits or fixed-income products. Therefore, a well-executed plan helps you to make efficient decisions about your money and invest it in the right set of investments. 

It enables you to mix around tax-saving products. 

It helps you focus on your life goals rather than settling on products. The most important aspect of having a well-planned goal is that it shifts your focus towards a vital goal that matters the most to you, such as buying a house, paying for your child’s further education, or planning for retirement. Since we are not taught this financial language, we tend to believe that investing in products is the right way to manage your money.

Financial planning is essential because it facilitates money management so that a lot may be accomplished even with a small budget—and that's what is required for an opulent living.

Money management

As states earlier, the key to having a well-executed strategy and action to reach financial stability for luxurious living is being able to manage your money so effectively that it has no negative impact on your finances or ways of life.

To best understand this, let’s take this scenario.

A 45-year-old individual intends to take a break or retire after devoting 20-25 years of their life to a professional career or service. Assume they have been investing Rs. 10,000 per month in SIPs or stock mutual funds for the previous 20 years. As a result, the total savings throughout the 20-year period would have only been Rs. 24 lacs.

[Rs. 10,000 X 12 months = Rs. 1, 20, 000 per year

Rs. 1, 20,000 x 20 years = Rs. 24, 00, 000/-]

But if you look at it historically, any fund that has completed 20 years, you would have anywhere between Rs. 2.5 to 3 crores in your account by now. That’s the sizable sum by investing Rs.10,000 every month.

The meaning behind adding this short scenario is to deduce that living luxuriously can happen only if you have a planned investment.

Take it from the expert

As Warren Buffet- the most successful investor and the seventh wealthiest man in the world, rightly quotes, “Never depend on single income. Make investment to create a second source”, you should take inspiration from this and start planning your investment right away. It might not make you as wealthy as Mr. Buffet, however, it would definitely help you live a happy and luxurious life. 

 Views are personal. The author is the Founder and CEO of FinMapp.