We all know that it is important to have a financial plan however in most of the cases it is not done due to some or the other reason. Mostly people keep their money lying in bank accounts or FDs (the easiest way) and then after few years keeps cribbing about other well being. Let us see different reasons which people make for not doing the same.
I am too busy, don’t have time
So is everyone. Today’s life is a busy life even for 5th grader. However Financial planning does not take so much time. May be a weekend initially and subsequently 2 hrs. every week to review your investments should be sufficient. However, it may vary with your understanding about finance. Don’t mind taking 2-3 leaves in a year to manage your hard earned money, for which you worked for remaining 363 days. Definitely, if you are already a billionaire, then it may take longer and now is the time for you to hire a financial advisor for you.
I don’t need a financial plan
It is interesting to hear from one of my friend that “I don’t have enough money so I don’t need a financial plan”. However, it makes it even more important to have financial plan when you have resource constraints. Each and everyone will grow old and will retire, everyone will try to contribute best to their children’s career and marriage, likes to live in his own home. So if you think anything like this is not going to happen in your life, then only you might not need a financial plan.
Financial planning means investing
No, it is not. Generally people gets confused between the two and takes them as inter-changeable terms, which is not true.
Investing is just one side or sub part of financial planning process. Investing is done in order to achieve our financial goals. Financial planning refers to ascertaining the amount of money required to be invested, the reason of investment and its tenure or investment horizon. Apart from this, financial planning covers making a budget of our daily household expense, tracking the cashflows, understanding our financial responsibilities, getting the optimum insurance cover and taking right tax related decisions.
Financial Planning is only for wealthy
Many people think that financial planning is only for rich and wealthy people, which is not true. It is about managing money between present and future needs which all the more important for people with constrained resources as such it is important for all and not only for any one segment. However, you may choose to g to financial planner or get a good financial education to save on charges of financial planner.
Financial planning is a one-time exercise
Not so easy my friend. When you can keep earning money throughout your career, why you expect this to end in one time. Financial planning is a exercise to plan in a systematic manner about the way to reach to one’s strategic financial goals. As a one-time process you need to define your goals and align your finances towards that and then you need to review your financial plan regularly. Need to understand that though our financial goals may not change, but with any changes in the environment or economic scenario like changes in policies, taxation change, we need to adjust our plan accordingly in order to remain in line for achieving our financial goals.
I am too young for financial planning
I would rather say “Earlier, the better” Its not about the age in the financial planning. Starting younger become very advantageous with power compounding playing for longer innings thus making a increasing the investment corpus by a huge amount. The yearly interest getting reinvested again and again creates a retirement corpus to an unimaginable amount! Thus staring or planning at the younger age is always better.
Financial planning : A free lunch
Lots of people believe that it is a free lunch and they don’t need to pay for it. Remember, there is no free lunch. Insurance agents or distributors giving you free advice may try to sell a financial product with better commissions, which you don’t need completely. It is always better to educate yourself about financial products. Alternatively, you may also seek a guidance from a financial expert for products for which he may charge you a nominal fee.
Financial planning is same as retirement planning
Planning for the future is not always for retirement. However major responsibilities like child education, child marriage, buying a house etc comes before retirement. Also Financial planning includes planning for the unforeseen situations of lives. And you do not need to make big sacrifices now and holding your immediate life goals to make merry in future. Also with rising inflation, it becomes all the more important for us plan for our future needs.