Keralites are famous for their literacy rate, living conditions, social development, etc. But when it comes to saving money for future, we Keralites are far behind from any other state in the country. It doesn’t mean that Malayalees are a complete failure in money saving. It is just that Malayalees have a common affinity towards Physical assets such as owning a house, land, commodities etc. than financial assets like mutual fund investments. Physical assets are believed as an important method of money saving in India.
A house which we have bought or build by taking a home loan can never be considered as an asset; rather it is a liability or an emotional asset unless you sell it. A person takes in the burden of a lifetime to repay the loan to own a house, thinking it as the biggest asset one could have. In case you are having a second home or land, it can be considered as an asset. But are physical assets a real asset? A real asset is one which can provide with income. So, if we are paying a fixed amount in regular periods for a house we live in, then it can be added to the list of things which are a burden to the income, rather considering it as an asset.
This is where the importance of asset allocation gains power. To have a financially sound and secured future one should always consider making investments in physical as well as financial assets. While buying physical assets such as a new house or land, also consider investing in mutual funds, which are transparent and has the strongest controlling systems in the country, along with other financial assets. Having a balanced investment method will always hold ones back through tough times. But statistics show that Malayalees have not excelled in financial literacy and are having a realistic approach towards financial planning. For example, many choose Endowment policies over a Term policy, thinking it as the best decision. But it’s not true, to cover the biggest risk in life, a sudden death is the wisest thing one can do for the better tomorrow of his/her family. So, people should start thinking about investing in both assets. This way one can achieve financial stability and will be able to meet all expenses in the future. Also, it is better to ‘start saving earlier’ than to regret about it later.
We get to taste the sweetness of savings while we face a shortage in income or at times of unexpected happenings. After the recent episode of floods in Kerala, many have left homeless and facing enormous damages to their houses, lands, business, etc. In this situation, financial problems may arise and physical assets might not be enough to overcome the loss. Even after this disaster most Malayalees, both residents of Kerala and NRIs will buy lands and houses again, as because it is considered to be an asset. But a rethinking is required in this arena. It is time to think and start investing in multiple assets to be prepared for any such future incidents. “If we plant a tree when we are wealthy then we will be able to have some fruits from it later” – is the basic principle of financial planning. Investments which we’ve made earlier will act as a savior if we were to face a financial crisis. So while rebuilding your house or business also consider the benefits of financial assets and start investing for a better future!