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01 Jul 2022, Edition - 2544, Friday

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5 Basics of Financial Planning Most Investors Often Get Wrong

Covai Post Network



When it comes to financial planning, investors often have the wrong idea. Whether they think of it as that annoying Facebook friend who adds too many pictures in his ‘My Travel Diaries’ album or maybe it’s a vague task they imagine getting to someday, the misunderstandings endure.

However, financial planning is the process that helps investors find the shortest route between where they are (currently) and where they want to be financially (in future). And, in this journey towards financial destiny, ignoring few basics of financial planning can off track investors.

Here are five such basics that most investors often get wrong. Avoiding them can make the journey safer and smoother!

1.“It’s Too Early to Start Saving”

People, particularly young individuals, often say, “I will start saving later, when I can afford.” However, that could be a long wait, as life has a funny way of never settling down.

Remember that it’s never too early to start saving for your future. Because the earlier you start, the better your chances of navigating challenges and achieving your goals.

Preferably, one must start building up a fund right from the time they start working. Jumping early on the financial planning bandwagon, only gives you more time to build yourself a significant nest egg. So, whether you have just bagged a new job, or you have been working for a few years in the corporate world, now is the perfect time to start planning for your future.

2.“Financial Planning Is Only for Wealthy Individuals”

One of the biggest notions that most investors have is that financial planning is only for the rich. Regardless of income, life-stage and age, anyone with a desire to live their best life possible and protect their family can benefit from financial planning.

Put simply, no matter what the size of your income is, it does not affect the size of your dreams. Engaging in proper financial planning can allow you to achieve your goals no matter how big or small.

3.“Bad Things Won’t Happen to Me”

Often newspaper headlines are filled with life-changing events that convince us that life’s uncertainties can have negative financial consequences on the families. Yet we fail to prepare financially for such events.

For instance, not having enough savings and investments in the event of job loss can put the person as well as his dependents in emotional and financial trauma. Or not having sufficient term life insurance in the event of the demise of the breadwinner can lead to financial strain on the surviving family members. They may require compromising their goals in the absence of regular income.

Therefore, don’t assume that these events won’t occur. A smart move would be to invest in best short-term mutual funds and term life insurance for wealth creation and financial security respectively.

4.“I Am Saving Enough for My Retirement”

Most of us often underestimate the amount of money we need for our golden days. To estimate the right amount, you need to create a financial plan that sets out specific goals and determine the amount you would require to accomplish each goal.

For doing so, you can take help of retirement planning calculators provided on websites of reputable insurers like Max Life Insurance. Consequently, you can invest a part of your savings in some of the best retirement plans available in the market today.

5.“Once My Financial Plan Is in Place, I Can Forget About It”

Like life, financial planning is a dynamic process. Due to changes in your lifestyle caused due to marriage, house purchase or change of job status, your priorities or goals may change over the years.

Therefore, in order to stay on track, revisit and revise your financial plan to reflect these changes.

In a Nutshell

Financial planning may be something we procrastinate, as future seems to be many years ahead. But we tend to forget that what we do today, determines how smoothly we handle our lives in the years to come, at least financially! So, know if you are ignoring the above-mentioned financial planning basics. If yes, rectify your mistakes to get your financial life on track.

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