5 Truths that will make your Financial Planning easy!
Mithilesh Singh 28 May 2019
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Credit card bills to pay.
Outstanding personal loans. 
Late bill payments. 
Insufficient money coming in to cover up the required spending. 
 
When it comes to money, life is not simple. You may be worried about debts, insufficient retirement kitty, and other financial woes that may arise due to poor financial planning. You would lead a more enjoyable life when you are not stressing about bills and have sufficient money in the bank. The good news is that it is possible. You only need some structure that will make your financial planning easy. Get your money stuff on track with these five truths. 
 
1. Financial illiteracy is costing you a lot 
India is home to 17.5% of the world’s population but nearly 76% of its adult population does not understand even the basic financial concepts. - LiveMint
 
When will you be financially stable to buy your dream house?
  
You can quickly answer this question if you are acquainted with the ‘RULE of 72.’ Watch this insightful video to know more about this rule.  
 
A little financial knowledge can be disastrous. You may be taking care of several financial avenues, including investment portfolio, retirement corpus, insurance plans and many more, but are you sufficiently informed about money to make wise and precise decisions. Financial literacy serves as an up-to-date foundation and helps you understand money – how it works. Being financially sound regarding money enables you to take care of its management, investment and expenditure to successfully fulfill the monetary milestones of your life. 
 
2. Saving 10% won’t get you through retirement
Life expectancy in India has increased by 11 years since 1990.World Economic Forum
 
Your retirement plan is more than just contributing toward your employee provident fund (EPF) and public provident fund (PPF). Have you ever calculated your retirement corpus? If no, you must watch this video to be informed of the importance of retirement plan. If yes, did you consider life expectancy as a deciding factor? Increased life expectancy means a long life after retirement. It gives you several additional years to lead an enjoyable retired life only if you have saved sufficiently for those years. You need to maintain the same lifestyle as you currently have. Rising inflation rate and increasing expenses demand a large corpus for your retirement. Between 1990 and 2017, India’s HDI value rose from 0.427 to 0.640, an increase of nearly 50%. It means that by 2050, India’s average life expectancy will be 74.2 years. It means you need to save enough for all those additional years. Thereby, be an early bird and invest in the right avenues to build a decent retirement corpus. 
 
3. You are losing a lot due to the cost of delayed investment
Are you losing money due to the cost of delayed investment? Maybe! Successfully investment doesn’t mean taking high risks and expect 20% returns, or make bets or wait for a jackpot. You can safely let your money grow through compounding. The concept of compounding is simple, yet powerful. Benjamin Franklin once wrote somewhere about compounding: '''tis the stone that will turn all your lead into gold. Remember that money is of a prolific, generating nature. Money can beget money, and its offspring can beget more.''
 
What is Cost of Delayed Investment? According to Wikipedia - The accrued interest on the investment for the duration of the delay can have a significant effect on the net returns. The cost grows with the period of the investment; the longer the investment is delayed, the higher the cost is. Watch this short video to know more about Cost of Delayed Investment.
 
Thereby, follow three golden rules diligently – 1. Start early 2. Have patience 3. Start with as much as you can and let the magic of compounding work on your investment. For example, if a person starts with a monthly investment amount of Rs 2,000 per month at the age of 35 for the next 25 years, the maturity amount will be 26.8 Lakhs, but if starts the same investment at the age of 25 for next 35 years, the amount will be 76.6 Lakhs. 
 
4. Cost of inflation is swaying your returns
Lack of financial literacy comes as the biggest hindrance to building wealth and a secure financial portfolio. Inflation is one such factor which is often overlooked by investors. Cost of inflation will evidently impact your returns too. As mentioned in the video link above - you would wish to maintain the same lifestyle after retirement as you are currently living. But, the food costs, petrol prices, airfares and the price of every other commodity will escalate due to inflation which will eventually drive up the cost of living. Your investment should be sufficient to fetch enough returns to enable you meet this cost. The key is to put money in different investment avenues including ones that have historically succeeded in keeping up with the pace of inflation. 
 
5. Common financial pitfalls may distort your financial plan
Life is too short to make financial mistakes. So, rather than trial and error approach, it makes more sense to learn from the mistakes of other people. Always consider your financial goals in mind before you start investing. Never start with vague goals. Be clear, specific and detailed with your goals. For example, if you want to save for your child’s education, it is better to invest money in a child plan rather than FDs or ELSS. A child plan will give you a peace of mind that someone is present to take care of your child’s education even in your absence. Similarly, funneling your money to too many financial products can result in dilution of returns rather than diversification. Keep reviewing your performing and nonperforming investments and change them when required. 
 
The journey to a regret-free financial life starts by making calculated decisions. A foolproof financial plan not only depends on investing in the right avenues, but also ensuring that you can drive out maximum gains out of your hard earned money.  
 
Financial planning is like navigation. If you know where you are and where you want to go, navigation isn’t such a great problem. It’s when you don’t know the two points that it’s difficult. – Venita VanCaspel
 
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