How to balance future and present financial needs

Jayesh is a 36-year-old father of two. He is the sole breadwinner of his family and earns a good income. Jayesh has been careful with money and has set asavings and investment plan in place which he adheres to religiously. He is sure that he is well on track to meet all his goals, such as his retirement and the children's education and other needs. 

However, he is finding it increasingly difficult to manage his current expenses and savings. He wonders if he should cut down his expenditures so that his future is not at risk. 

Jayesh seems to have risked his present to secure his future. He is making the mistake of assuming that all important goals are in the future, without considering the effect of cutting back on current essential requirements. He should understand that his children need good education and exposure, his family's health should not be compromised and he must not overlook the importance of hobbies and relaxation for himself and his family. 

Jayesh's problem may be due to the fact that he may be saving too much for the future since the corpus he has estimated for retirement or his children's need may be more than what is actually required. He should reconsider his savings targets and try to rationalise them. For example, instead of looking at a long retirement period for which he has to provide for, he can consider being employed for 7-10 years even after he retires and so supplement his retiral income. Similarly, he must consider the education loans that will be available to meet some part of his children's education. Jayesh should also check whether his funds can be invested to earn a higher return albeit with a little more risk. This will bring down his savings target and reduce pressure on his income. 

Jayesh must align his savings target to his stage in life. He should cut back on the target now so that his current expenses can be taken care of comfortably. In the next stage of his life, his income is likely to have increased much more than expenses and he will be able to increase his savings levels again. Reviewing goals and calibrating his savings to his income at this stage in life are the things that will help Jayesh. 

Content courtesy: Centre for Investment Education and Learning (CIEL)-The Economic Times

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