The job of someone who is in the armed forces is fraught with unique challenges that often lead to uneven financial planning. Here’s a look at those potholes and steps to take to smoother the path.
Irregular Attention To Finances: Frequent transfers are a challenge. Access to financial advisors may be difficult and Internet connectivity may be intermittent. In such a scenario, regular upkeep of investments is nearly impossible. This often leads to people choosing ‘simple’ financial products such as fixed deposits, which, in the long run can prove detrimental to financial security. To overcome this challenge, hire a good financial advisor and remain in touch with them, either by phone, email or SMS. “They should avoid independent investments, such as stocks, that require constant supervision. Immediate job transfers could lead to them not being able to monitor, research or liquidate the investments,” says Col. Sanjeev Govila (Retd), who now runs the Sebi-registered financial advisory firm, Hum Fauji Initiative. Ensure that investments are automated, for instance, through systematic investment plans (SIPs) so that remote postings do not result in discontinued investments.
Read more about the nuances of financial planning for armed forces personnel here: Armour Plating For Financial Security
Lack Of Financial Knowledge: Apart from lack of connectivity, field postings and the 24x7 nature of the job leaves little time for planning or gathering adequate financial knowledge. Moreover, since officers usually join the services at a young age of around 21-22 years, and non-officers even earlier, the likelihood of having financial knowledge is low. Limited interaction with the outside world can mean lack of exposure. Usually, there is low awareness of not only financial planning or investment, but also of its importance. One of the ways to rectify this is to use whatever opportunity is available to start learning the basics. This will give an idea of what is needed and also risk appetite. If self-investing is difficult, take the help of a suitable financial advisor. While the first step of financial planning—budgeting—may come early in life, the whole process is much longer.
Overweight On Some Products: One may be giving too much weightage to insurance in investment portfolios or not having enough protection. A common mistake is to buy or invest through insurance policies to reduce tax outgo and think that these policies give adequate returns. The effect that inflation can have if often forgotten. Diversify your portfolio into different asset classes based on your needs, goals, ability to invest and risk profile. Have enough insurance but use these only as part of protection and not investment. Mixing insurance with investment is a mistake best avoided.