We need to avoid making basic mistakes to increase financial safety and security

Financial planning has become a way of life for us today. In fact, it has become the most important part of our life. Be it a CEOs, COOs, or homemakers, everyone realises the important of financial planning for the safety and security of their loved ones.

In the past decade, India has seen a consistent rise in lifestyle, disposable income, and people’s aspirations. Wants, needs, necessities, and wishes have been always climbing the upward curve. In this scenario, financial planning has become all the more important given that simple mistakes could prove very costly if not corrected in time. It’s ideal not to make those simple or basic mistakes in financial planning. This becomes pivotal for us in order to ensure that we have our retirement plans, children’s marriage, education, and all other aspects firmly covered.

Moreover, given the economic uncertainty in the world today, with much more in store, going ahead, proper financial planning becomes crucial for securing our future and for safeguarding us from financial worries during our retirement.

Here are a few basic mistakes we must avoid to safeguard ourselves and our near and dear ones from a financial crunch, going forward:

Being goalless in terms of long-term finances

Being goalless in terms of financial planning for the future is like travelling in a boat without a ruder, we are bound to lose direction, valuable time, and precious money, which we could have saved for our future. Therefore, try and have a well-defined financial plan in place.

Save first and spend next

We need to avoid spending first and saving next. In fact, we need to do it the other way round. This policy will prove helpful in your long-term plan for your finances.

Not going to a professional financial advisor

Certified financial planners are experts in their field. They could be our best bet at achieving our financial goals since they know how best we could balance risk and returns through a well-diversified portfolio. Trusting an expert is always a good idea rather than trying it ourselves.

No plans for contingencies

We plan a health insurance cover, life insurance cover, and so many other things, but forget planning a basic cover for contingencies. Having insurance covers is good but not enough. It’s simple. We just need to have a small contingency fund, which covers for at least 4-5 months of expenses. This could be invested somewhere as well so that it could fetch you returns. Contingencies, if not planned for, can hurt the best of financial planners.

Forgetting inflation

We should not ignore the impact of inflation on our overall financial plans. We need to factor it into the plans. This is where a professional expert’s help can come in highly handy. We need to keep in mind that the inflation rate for healthcare services and education in India is significantly higher than the consumer price index based rate of inflation.

It’s pivotal to have an adequate life insurance cover

It is advisable to have an insurance cover of around 10-12 times your annual income. You could consult a professional for more help. Fancy plans may look attractive but will not serve your purpose later in your life, given growing inflation.

Forgetting to keep a tap on the plans

You might be doing all of the above steps, but if you forget to monitor you plan periodically, it could not give you the desired results. Remember that financial plans often need minor adjustments, which are pivotal for successful implementation, going forward. Plan the period of review based on your overall plans.

Carefully planned finances will go a long way in securing a healthier financial future for you and your loved ones. However, if you have committed any of the above mistakes and are not ready to amend your ways, your plans of securing your family’s future might be jeopardised.

Disclaimer: Investment in securities market are subject to market risks, read all the related documents carefully before investing.