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 around the globe since the 1990s. Due to the rapidly growing life expectancy, you might have to prepare yourself financially to survive in the long run. 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 as well as reduce the financial setbacks in your life.
Since financial planning is a long process, you might either get distracted during the process or end up taking a wrong decision. However, one false move during the whole process can put you in a huge financial loss in the future. Hence, you should consider all the mistakes and errors that can happen so that you are able to save yourself from financial 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 either opt-out of investments or invest a minimal proportion of your money. According to a survey, approximately 2% of the Indian population invests on a regular basis.
While investing can help you to create wealth at any given point of 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 pay check, 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, for the time being, it can also ruin your financial discipline. Lack of discipline can deviate you from reaching your financial goals.
When you are young, you should inculcate financial discipline so that you are able to abide by it in the future. As a young adult, you can cut down your irrelevant expenses from time to time and save a major proportion of your money for investment plans.
- Failing to build an emergency fund
The unpredictability of life can be high. According to data, over 85% of the Indians feel that the uncertainty level of life is high. Due to rising unpredictability, there can be a contingency such as critical illness, loss of income, physical disability, and so on within the family.
While you might be unable to protect the unpredictability of life, you can prepare your families financially. When you start earning, you should save your income in such a way that you can manage any unannounced expenses for the next 3-6 months. That way, you can manage the expenses during a crisis without any financial constraints.
- Ignoring the long-term investment
Although you might fear to invest, 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 types of investment options in the market with the primary aim of the growth of your funds.
While there are various investment tools in the market, you should select those investment plans that can provide you with high returns as well as diversify your portfolio. Moreover, you should look for tax-saving options like a Unit Linked Insurance 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 fulfil those goals faster. You might have dreams like buying a new house or a car, starting a new venture, exploring new cities, and so forth.
When you decide where you want to reach or what you want to achieve, it can help you to move in the right direction. In addition to this, you can ensure that you don’t have any distractions while reaching your goals effortlessly.
- Avoiding hiring a professional
Financial planning can be serious business. While planning for your future finances, you should possess accurate understanding and skills. In addition to this, you should be aware of the market condition and returns. Lack of knowledge can affect your financial planning and leave you in a hassle.
In case you are unaware of the market scenario, you should seek help from a financial expert. A financial expert can guide you through the entire process of financial planning as well as 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 for it, 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.