We are all busy with our day to day activities…kids, household chores, office etc. occupy the front seat. We are left with very little time to plan our personal finances. Though we all know that planning is very crucial and important step, we still procrastinate when it comes to planning for our finances.
Before you slip through saying that Planning is not your piece of cake, read these common myths about financial planning. Financial planning is for everyone. Here are some common myths that you should avoid
- Only the rich need to bother about it
- I am too young to plan for my money. I need to enjoy first
- My finances are way too simple…I don’t need to plan
- Planning is all about only investment.
If you are thinking on the same lines…stop and rethink!!
Read on to find more about financial planning.
What is financial planning?
Financial planning is not a one step process. You do it today and it is over for the entire life. No! It is an ongoing process. Just as your needs and aspirations in life keep changing and maturing over years, financial planning too matures over time. In its simplest form, financial planning is the means of meeting your (family included) goals through proper management of your finances i.e. money you earn, save, and invest.
So, whether you want to plan for your child’s higher education and marriage, your own retirement, a foreign holiday, or even a second and bigger house, you can reach them comfortably and without compromising, is through financial planning.
The first and foremost step to planning is to set your targets. Meaning- first write down your goals. Determine a time line to achieve the same. There can be two types of goals- long term goals such a retirement plan, children’s’ marriage etc. The other type is the short term goals- like buying a bigger vehicle, owning your dream house etc. Write down each of these goals against the estimated time line. Also write down the speculated amount that you would require. This would give you a fairly good idea of the amount you would require at each stage of your life. Make sure that you consider the inflation- the biggest money monster which will eat away most of your income if you don’t plan the right way.
I have my goals set, what next?
Once you have a clear picture of your goals and the amount of money that is required to achieve them, look for various investment options that are available in the market. Determine your risk potential. If you are young, your risk potential is much higher than a person who is nearing retirement. Depending on your risk potential, you can invest you money into stocks, bonds, SIPs, real estate or FDs.