The life expectancy rate of Indians is on the rise. According to a report, it has 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 people might not be comfortable with the idea of investing their hard-earned money. Since savings can be a major part of their lives, they might opt out of investments or invest a minimal proportion of their money. According to a survey, approximately 2% of Indians support 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 prevent you from reaching your financial goals.
When you are young, you should teach financial discipline so that you will abide by it in the future. As a young adult, you can occasionally cut down on irrelevant expenses and save a major proportion of your money for investment plans.
Failing to build an emergency fund
Life can be unpredictable. Data shows that over 85% of Indians feel the uncertainty level is high. Due to rising unpredictability, contingencies such as critical illness, loss of income, physical disability, etc., can occur.
While you might be unable to protect your family against life’s unpredictability, you can prepare financially. When earning, you should save your income from managing unannounced expenses for the next 3-6 months. That way, you can manage 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 generate a substantial corpus but also gain high yields in return. Today, you can find different investment options in the market, with your funds’ growth as the primary aim.
While various investment tools are available in the market, you should select those plans to provide high returns and diversify your portfolio. Moreover, it would help to look for tax-saving options like 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, you should be aware of market conditions and returns. A lack of knowledge can affect your financial planning and be a hassle for you.
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. 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 monetary 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.
