Financial planning for the salaried class is pretty easy and straight forward. You receive a certain amount every month, which you can decide how to spend. As per your plans and needs, a certain amount can also be invested every month to generate returns later on.
However, professionals like doctors, architects, consultants, designers, architects, engineers, etc. do not have a fixed income. And their unique financial challenges require a tailor-made solution for them.
At the same time, they have a demanding work life. Unlike the salaried, they do not have their work hours defined. This leads to their work taking up a lot of their time, leaving them with no time for financial planning. Thus, the solution here for professionals is to focus on identifying their financial goals, and the amount that they need for the same. These goals could be both, long term and short term; such as buying a house, a vacation, saving for a child’s marriage, retirement, etc.
Get a rough idea of how much are you willing to spend on each of these goals, considering that these are due today. Then increase these amounts by the rate of inflation, to give you specific future estimates. Or you can take help from a financial planning expert to help you out. Once you are aware of the goal amounts, start to invest in them.
For long term goals that are more than five to seven years away, investing in an equity fund through a SIP is very effective. Perhaps the only asset class that can beat inflation over time is equity, which then makes it ideal for long term wealth creation. At the same time, equity is also very volatile. Amidst all this volatility, a SIP would help you to average out your investment. It will also keep you disciplined about investments. The hurdle, however, for professionals here is their uneven income flow.
Given the very nature of their work, professionals tend to have uneven incomes. These uneven incomes are further affected by the many fixed expenses that these professionals have to bear. For instance, consider a doctor who has his clinic with the staff working there. He has a certain set of fixed expenses to meet every month, from the rent of the clinic to the salary of the staff. At the same time, his income fluctuates from month to month, depending on the number of patients he sees, the surgeries he conducts, etc.
How are these professionals to do a SIP?
First, ascertain your net income from over the last few months. Based on these figures, try and determine a fixed amount that you possibly can save every month, and then create a SIP for that amount. Any extra investable surplus should be strictly kept separate and should be used to regularize your SIPs. That is to say if you have a SIP of INR 10,000 a month, and in some months you have INR 2000 extra, keep this money separate. The next time you are low on funds for investment, take out some money from this surplus.
If your surplus keeps on increasing in quantum over time, channel it into your equity funds. Should you receive a windfall, again invest it in your equity funds in a staggered manner. Investing all your surpluses in one go is not a good idea.
A lot of professionals also question the need of investing every month through a SIP, when the can manually invest the amount instead. This brings us back to exactly where we had started from. Professionals often miss saving and investing in systematic ways due to their busy schedules. At the same time, when income flow is uneven, investing ceases to remain a priority. Opt for SIPs to keep you more disciplined and to help you achieve your goals effectively.