Financial Lessons from the Festival of Lights - Diwali

Happy Diwali; let us discuss fireworks, Diwali and great financial planning.

As we wind up our festivities of Diwali 2011, my mind went to the powerful lessons that Diwali taught us all. These thoughts gathered momentum when I started thinking about the similarities of Diwali and financial planning. It made me realize that financial planning lessons were so simple, yet enlightening that even a 12-year-old could master its principles and start financial planning for a lifetime.

Fireworks and Diwali 

I have always enjoyed fireworks, both as a child as well as a parent and found that mine as well as my children’s safety and comfort lay in obeyed certain rules while handling fireworks. This included avoiding loose and flowing clothes and wearing appropriate footwear, goggles and protection for the ears. Next noisy crackers caused hearing, ENT and nervous problems, with smoke causing ENT and allergic problems. This made me come to the conclusion that we need to enjoy crackers and fireworks, but were excesses were to be avoided.

Safety applies to all Diwali, as it does to other aspects of life with our requiring reading and following instructions on the boxes. Next keeping of a bucket of water handy to put off fires and keeping numbers of fire stations proves handy. In addition vigilance and safety of children while using fireworks is to be adhered to, with keeping fireworks out of reach from children when not in use.   My dear friends now is the right time to view the great co-relation between crackers/fireworks and financial planning.

Grasp the financial planning lessons Diwali teaches us:

Ø  Modern science with its developments have been able to render us some very useful lessons like noise pollution that could affect not only infants, the old, and those with nervous, heart and psychiatric problems, but also cause slow declining abilities in many others.  

      

This applies to noisy stocks also; this noise pollution in the form of everyone talking about hot stocks and best next issue. This information could also affect us with its full impact. This inside information may at times prove very dangerous if acted upon. We have observed many investors not only being be charged with fines and/jail, but it has been harmful to financial professionals as well.  Next if they are rumors the financial harm could be too large to recoup and rejuvenate easily and quickly. It is worth understanding also that some information could be stale and if acted upon cause indigestions of the worst order.

Ø  The next most close and interesting co-relation of fireworks and the colorful nature of the festival Diwali are being prepared for emergencies, with this meaning keeping water and the numbers of the nearby fire stations handy. This applies to also using long sparklers and incense sticks, avoiding the use of metal and glass containers and using fireworks in open grounds.

It is true that emergencies and contingencies are a part of everyone’s life and being a wise and smart financial planner requires not only planning for emergencies, but also for contingencies in the form of death. Finances in the form of term insurance could provide for the stable lifestyle of your loving family on death. Health insurance and critical health insurance plans would provide for health and critical illness coverage and stable lifestyle in such contingencies. The youth could benefit also with investing surplus funds on land in remote places and allow it to appreciate. Creating contingency funds could act as emergency fire extinguishers.  

Ø   I appreciate those who have listened to the experienced regarding wearing appropriate clothing, footwear and other safety accessories while enjoying fireworks. Financial planning for a lifetime also requires certain measures.

Understand that investing is different from financial planning for a lifetime. Financial planning requires clear understanding of the risks and returns available on the different investments like shares, mutual funds and fixed deposits in companies and banks So you need to draft a clear risk management strategies in while constructing your portfolio.

Ø  Storing of fireworks out of reach of children properly requires as much innovation as children are very smart to fool parents now-a-days and get into accidents and dangers. Parents need to be smart and creative to find out what works and what doesn’t. The same thing dear chums apply to safety and security of our investments.

Safety and appropriate storage of our precious investments in the form of shares, mutual funds, land and flat documents, gold and gold ETF, insurance and other investments lies in storing them in separate places in lockers at home/banks and other places. 

In addition to storage, the information regarding where we have stored these documents should be a family information and secret for safety.

Finally, we were taught by wise parents to not make our own fireworks, as it is not our expertise. Similarly a financial expert is the best person to advice us on financial planning for a lifetime. Finding and engaging a financial planner would be best to create and make changes in your financial planning according to your life’s changing circumstances.

The author is Ramalingam K, an MBA (Finance) and Certified Financial Planner. He is the Director and Chief Financial Planner of Holistic Investment Planners (www.holisticinvestment.in) a firm that offers Financial Planning and Wealth Management. He can be reached at ramalingam@holisticinvestment.in