October 30,2011 was an important landmark for India as a country when we successfully hosted a Formula 1 race. Understandably,the event captured the imagination of people across the country. F1 became a buzzword and we all wanted to experience our share of it. To put it simply,a Formula 1 race is akin of our lives where we (as drivers) are targeting a goal simultaneously and each of us want to achieve it equally. If you look hard enough,the Formula for Financial Freedom is exhibited by each and every F1 driver. Heres what we can learn from it Know your race strategy Every driver in each race decides on the strategy before the race even begins. The strategy helps the driver decide when to attach,when to schedule pit stops,when to go easy,how to use resources adequately,etc. Before getting into a race drivers try to learn about the circuit,the environmental conditions,etc. to prepare themselves to handle various challenges. The same can also be said of your financial plan which is the strategy or blueprint of your financial future. Without a well-defined plan,you will not be able to make sufficient headway,since you will never be sure about your resources or how to begin using them the best way. Also,before starting with a financial plan it is important that you have adequate knowledge of the current market and economic conditions in India and globally,the expected policy changes in the immediate future etc. If it starts raining during the race,the cars immediately have to come in to change their tyres. Your financial plan is incomplete if it too does not account for the possibility of rain (emergencies). A contingency plan should be the first step while formulating your financial plan. Every Lap is important During race,drivers try their best to beat each other in the lap times that they register. In the recently concluded race in Delhi,Vettel from Red Bull,continued to stay aggressive right from the first lap to the last to ensure that he can stay ahead on each one. Yet,when the time calls for it,the same driver also eases his foot from the accelerator,conserving the car to make it last the race distance. Every lap in F1 is a financial goal in your financial plan. Your financial plan can be considered successful only if you have been able to meet most of your financial goals. Like F1,you need to decide when to be aggressive while trying to achieve your financial plans and when to be cautious,wherein you dont end up falling short of your broader vision. Timing Pit stops Pit stops are also vital to review your financial plan. When you slow down to analyse the progress of your plan,you can understand where you need to change your strategy,whether you need to refuel the plan with more finances,etc. The timing of reviews is also important if it is conducted too soon,you wont get a clear idea on the performance and if it is conducted too late,you may have lost track position in the race. Role of F1 race engineer Ever since car radios entered the realm of F1 it has become a common sight to see race engineers of various drivers on the pit wall. The race engineers constantly analyse the race,the changes in the conditions and monitor the resources available in the car. For you,the financial planner essays the role of the race engineer. By constantly monitoring the progress of your financial plan,your planner is the best guide to keep re-aligning your race strategy and helping you achieve your goals. Yet,for all the similarities between F1 and our lives the most important thing in F1 is winning the race. However,in our lives,as long as we have the finances to support our dreams the race victory means financial freedom. Author is Founder & CEO,Freedom Financial Planners
