The life expectancy rate of the Indians can be on the rise. According to a report, the life expectancy rate has been increased by 11 years worldwide since the 1990s. Due to the rapidly growing life expectancy, you might have to prepare yourself to survive financially. Today, the amount of money you accumulate can ensure your smooth life in the future. Financial planning can allow you to establish a framework in an organized manner and reduce the economic setbacks in your life.
Since financial planning is a long process, you might either get distracted during the process or end up making the wrong decision. However, one false move during the whole process can put you in a huge financial loss in the future. Hence, it would help if you considered all the mistakes and errors to save yourself from economic turmoil in the future. Let’s go through the top six mistakes that are commonly observed during financial planning:
Investing at a later phase of your life
Many of you might not be comfortable with the idea of investing your hard-earned money. Since savings can be a major part of your life, you might opt out of investments or invest a minimal proportion of your money. According to a survey, approximately 2% of the Indian population supports themselves regularly.
While investing can help you create wealth at any point in your life, investing early can have relatively high benefits. For instance, if you invest Rs. 5,000 in your 30s, you can build a substantial corpus of Rs. 75,00,000 in the future to meet your goals.
Spending on unnecessary things
After you earn your first paycheck, you might be in the habit of spending your money on shopping, buying expensive gadgets, and so forth. While spending on material things can allow you to gain happiness, it can also ruin your financial discipline for the time being. A lack of discipline can deviate you from reaching your financial goals.
When you are young, you should teach financial discipline to abide by it in the future. As a young adult, you can occasionally cut down your irrelevant expenses and save a major proportion of your money for.
Failing to build an emergency fund
The unpredictability of life can be high. Data shows over 85% of Indians feel the uncertainty level is high. Due to rising unpredictability, there can be a contingency such as critical illness, loss of income, physical disability, etc.
While you might be unable to protect against the unpredictability of life, you can prepare your family financially. When earning, you should save your income from managing unannounced expenses for the next 3-6 months. That way, you can work the costs during a crisis without financial constraints.
Ignoring the long-term investment
Although you might fear investing, it can be a major part of your financial plan. Investing can not only help you to generate a substantial corpus but also gain high yields in return. Today, you can find different in the market with your funds’ growth’s primary aim.
While there are various investment tools in the market, you should select those investment plans to provide high returns and diversify your portfolio. Moreover, it would help to look forlike a Unit LinkedIn Plan (ULIP), Provident Fund (PF), etc., to reduce your tax liability.
Following an aimless approach
Financial planning can be a plan of action to meet your specific goals in life. Therefore, before planning your finances for the future, you should identify your goals and develop a smooth plan that can allow you to fulfill those goals faster. You might have dreams like buying a new house or a car, starting a new venture, exploring new cities, etc. When you decide where you want to reach or want to achieve, it can help you move in the right direction. You can also ensure that you don’t have any distractions while reaching your goals effortlessly.
Avoiding hiring a professional
Financial planning can be a serious business. While planning for your future finances, you should possess an accurate understanding and skills. In addition to this, you should be aware of the market condition and returns. A lack of knowledge can affect your financial planning and make you a hassle.
If you are unaware of the market scenario, you should seek help from a financial expert. A financial expert can guide you through the entire financial planning process and simplify it for you. With the right expertise, you might even be able to reach your financial goals faster with an adequate amount of funds in your hands.
In a nutshell, financial planning can help you manage your funds and expenses in the future. Although you might not need a financial background, you should have the dedication and the will to do so. With the right financial planning, you can overcome your future financial burden. For instance, if you aim for a comfortable retirement, you should start your financial planning today.