All of us dream of living a financially secured life. However, reality strikes soon and we are brought to ground by our financial responsibilities – the monthly bills, family expenses, loan repayments, insurance payments and more. And the bitter truth is that we can’t fulfill our financial dreams unless we take good care of our financial responsibilities first.
So, how do you think are financial responsibilities and financial dreams different from each other? The difference between these two terms is the same that exists between our wants and needs. Our financial dreams are nothing but the things and/or experiences that we aspire for in the future, for instance, a luxurious holiday, a grand yacht, a beach house and more. On the other hand, our financial responsibilities are the day-to-day financial commitments that we must live up to. These cannot be overlooked or postponed, and also include various unexpected responsibilities such as medical emergencies, or future events like old-age, retirement etc.
How we handle our financial responsibilities impacts the realization of our financial dreams. You cannot think of achieving all those grand financial dreams unless you take care of your basic financial responsibilities first. Furthermore, it’s never a wise idea to ignore one’s financial responsibilities while working towards the accomplishment of financial dreams. You need to strike the right balance between these two. And this is where good financial planning comes into the equation.
Following are some more key differences between the financial dreams and financial responsibilities:
Time taken – Financial dreams are usually to do with future events, whereas financial responsibilities are the day-to-day responsibilities you cannot ignore. These responsibilities may also arise suddenly, without prior notice.
Continuity – Unlike financial dreams, financial responsibilities have a continuous nature, implying that they need to be handled on a daily basis. Financial dreams on the other hand can be prepared for over a period of time, by dividing your targets into short-term, medium-term and long-term goals.
The magnitude – Financial dreams can be of various magnitudes, but are usually big ticket in nature. For instance, some people dream about retiring with a healthy corpus of several crores. Financial responsibilities on the other hand are generally smaller in magnitude and require less time for their fulfilment.
Interrelated – If you look closely, all financial activities are interrelated to each other. One financial decision may or may not have an adverse impact on the other. When talking about responsibilities and dreams, you cannot think of accomplishing your financial dreams unless you meet each one of your financial responsibilities. Similarly, you can’t fulfil your financial responsibilities effectively unless you put your financial dreams in perspective and approach them in a well-planned manner.
Planning – Fulfilment of financial dreams requires proper planning, taking all important financial details into consideration. It’s important to understand that financial responsibilities should be given the highest priority in any financial plan. For instance, if you make Rs. 50,000 per month, you must first set aside Rs. 35,000 for your regular monthly expenses (i.e. your financial responsibilities) and only after you’ve done that should you set aside the remaining Rs. 15,000 for your dream vacation in the future (financial dream).
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