6 Financial Planning Misconceptions Demystified
Financial planning may mean different things fordifferent people. Some assume that they need no financial planning as they havevery little finances. Still others believe that once they have invested their savings for future their task isover.
Lets start the useful exercise:
Financialplanning may mean different things for different people. Some assume that theyneed no financial planning as they have very little finances. Still othersbelieve thatonce they have investedtheir savings for future their task is over. In addition some pre-conceivednotions that company we work for, pays our medical and hospitalization expensesso we need no reserve, combined with the notion that a life insurance policytakes care of death, disability and accidents.
The need forno financial planning is complemented with the myth especially among the youngthat their retirement is far away and they could easily plan for it just a fewyears in advance. To further complement this myth that our ancestors wouldleave behind estate and property for us to enjoy with a will.
Well dearfriends financial planning can never be overlooked as finances invested welltoday could provide for good financial resources in future. It is true that a personwho helps himself succeeds best in having financial stability in life.
Have a look at the myths of financial planning:
- I have life insurance to protect them in case of my death.
My hearty congratulationsfor taking up insurance policies to protect your family needs in case of yourdeath. But the question is do you have adequate insurance to look after yourfamily needs for a lifetime. In addition it is worth considering if you haveenough to look after your childrens education and marriage needs consideringthe rate of inflation. Also it is worth considering if your family would befinancially secure if they have to repay loans taken by you after your death.
- I just make both ends meet, where is the need to go in for financial planning?
You may be right, but if I were to tell you that weall need to provide for financial contingencies would you say financialplanning is unnecessary? So all of us have to plan to make their hard-earnedmoney to work for them, and this applies more so single income families. Financialplanning makes sense not only to repay loans taken but also to get continuoussupply of money for our needs. So weneed to have a strict look at our expenses and find ways to minimize them. Asmall example could be to forego a pack of cigarette a day to save and investin viable investment scheme.
- My financial planning is done as I have invested in different schemes.
I appreciate you for taking the first step towardsfinancial sufficiency, however believe me this is just the first step to the1000 miles towards lifelong financial stability.
All you are investments are really supporting yourfinancial goals or not? Is the schemes in which you have invested is reallyperforming or not? Is the maturity value from the schemes is sufficient to meetthe goals or not?
A financial need analysis to cover various shortterm and long term needs could be best accomplished with a financial expertsadvice on financial planning.
- Youth is to enjoy, retirement is far away. It will look after itself.
Let us face this myth headlong with analyzing thatretirement is not a contingency, but a necessity that is to be provided forright from the time one starts earning. It is advisable and much easier tostart saving when young, as savings become difficult with additional expenses.
Saving for retirement starting from youth through retirementplans seems much easier when the amount to be put aside for the corpus is muchless every year and it is also possible to save through various investment avenues.Starting to invest for retirement when young gives one the advantages ofcompounding of savings. This would also help take care of inflationarytendencies.
- I have enough health insurance, and my company gives me coverage too.
Being covered with health insurance and medicalexpenses at work is great, but this would not cover all your health expenses. Itis always good to take additional coverage and provide for unforeseencontingencies like critical illness that would not only involve expenses ontreatment, but also on maintaining the lifestyle of the family till one isready to go to work.
Being young does not prevent you or any of yourfamily members from getting a critical illness with the present lifestyle. Withfresh insurance coverage over the age of 45 being tough it is best to save forthis period.
- I do not have to worry as I will inherit from my parents as my children will inherit from me.
Inheritance has neither been a cake-walk, and awill is very important for inheritance. Financial planning involves the makingof a will to avoid disputes between the heirs. Making a will is not about howbig your property or estate is, it is more about necessarily making a willabout the inheritance.
Financialplanning is not just the forte of finance professionals alone, but is judiciousand smart planning of finances for a lifetime. Lastly financial planning is notan end but a means to an end of financial stability and security.