Hyderabad: When we venture out for an outing or long-distance travel or foreign sojourn we will sit and make plans with our family members to enjoy the trip. But that is only a journey, which may be extended to a week or a few months, but are we planning to spend the life journey on a smooth note. The majority of them say no. Unfortunately, we end up in debt and struggle for the rest of our life when we are supposed to spend life sans struggles. Here comes the financial planning with a solid strategy weighing the pros and cons in each stage. No matter how careful we are, sometimes our plans may go wrong.
Read: Financial plan can provide a roadmap to your future
We think a lot about financial planning and there may be some assumptions and others may be a bit closer to reality. Assumptions and predictions are never useful in financial planning. All numbers here are facts. How much salary do you earn? What are the costs involved? How much should be saved for the future? It is enough to know the answer to such questions. It is impossible to proceed with a plan that is far from reality. For example, suppose you want to invest up to 25 per cent of your earnings. If the costs are controlled a bit it is possible. But investing 50 per cent and spending the rest may be impossible in many cases. Even if a financial plan is prepared with such expectations, it will be damaged. But it does not come into practice.
To fulfil your wishes...
After 15 years your idea is to deposit the money required for your child's education. Suppose you are investing Rs 10,000 per month for this. At the same time, you wanted to buy a car. The EMI for this is Rs 9,500 and seven years is enough to pay it. Once we complete our car EMI we think of depositing Rs 20,000 per month if needed for children's education. This means that the amount you want to deposit for your child's education over a period of 15 years will be deposited within eight years. Even if you invest Rs 20,000 per month during this period, it may be difficult to get the desired amount. There is a possibility of losing compound interest in the long run. And, how to satisfy the desire to buy a car. One should take a decision only after saving a small amount and making a special budget for it.
Read: How to start your planning for new financial year?
Lack of discipline...
The practice may not be as strong as the idea. This is the reason why many are financially weak. When the income increases, it is natural that the expenses increase to that extent. At the same time, investments should also be increased to that level. You should not stop the Systematic Investment Plan (SIP) if you incur some additional expenditure. A financial plan should be reviewed at least once a year. Are we investing as planned and we should identify where we are going wrong and try to correct them?
An emergency fund is a must…
It is impossible to tell when and in what form an emergency will come. Always be ready for this. A sufficient amount should be kept available for at least six months of expenses. Otherwise, unforeseen needs may make you withdraw the investments made for the future. Financial planning is not done in a day. Changes are inevitably based on changing times, needs and events in life. Be prepared for this and if necessary, take experts' advice. Only then, the financial journey will reach the destination successfully.
