FINANCIAL PLANNING MYTHS & TIPS
Financial planning is not rocket science. It simply points out to a core fact: that you need to pay for your expenses all through life."
But when it comes to making our money work for us, these are the kind of stumbling blocks in our thinking we typically encounter:
Myth 1: Financial planning is for the oldies. I am only 25 years old. There's plenty of time to think about it.
Reality: The younger you begin, the better it is, because financial planning is a dynamic concept with the goals changing at every stage of your life.
"At 22, if you aim for a capital pool of a million dollars, at the age of 60, all you need to put away is $307 annually. But, if you begin at 30, you would require to put away $760 annually.
Myth 2: Planning is for millionaires; I live from paycheck to paycheck. Where's the surplus?
Reality: Everyone needs to save, more so those who have to spread the goodness thinly. Planning is meant for those who are building wealth, not so much for those who are wealthy. Planning can make all the difference. It does not matter how much you put aside. What matters is getting started, because as the saying goes, grain-by-grain a loaf is made, stone by stone, a castle.
Myth 3: One of my wealthy grand aunts might leave me an inheritance, or I could get lucky at the sweepstakes.
Reality: Only one in 100 people are lucky with inheritances or windfalls. The rest have to work out strategies to compound their hard-earned cash into a windfall at the end of their working years.
Myth 4: Investments are a big gamble? What if I lose?
Reality: When money is invested, there are bound to be periods of rapid growth, sudden dips, slow rise or steady rise. But you need to look at the bigger picture, think in terms of long-term gains and discard the short-term perspective. If you hate taking risks, there are always investments that guarantee your principal amount.
Myth 5: My kids will take care of me.
Reality: That's great thinking but look at your old-age expenses - the cost of living, the inflation, your medical expenses... wouldn't it be a better option to plan wisely so that you may uphold your dignity as well as have the love and support of your children.
Start Early
. The Power of Time: Time is one of the most important factors in financial planning. The younger you are, the smaller the sum of money you will require to set aside. The right time for planning is today.
The power of re-compounding: The money that you invest today may be a small sum, but owing to the interest you earn on it, it is growing constantly. Like a virus, it feeds upon itself, multiplying at a steady rate. Instead of you working hard, your money is working hard for you. As a financial advisor, I would advise that leaving aside a buffer of six months' salary for any eventuality, all your funds must be wisely invested to yield the best results.