1. It is too early for me
I often hear this when I risk starting a conversation on financial planning with a millennial. I know life has just started and you need to enjoy it, but it wouldn’t harm you to set aside a small sum of money regularly to fund your future goals. If you delay saving for your goals, the amount you need to save later on would only increase with each passing year.
2. It is only for the rich people
If you want to ensure that you can fund your future goal, you need to plan. Nobody is telling you to invest a big sum of money. It is very much possible to start with a small sum today and to go on increasing that as your income increases. Mutual Funds allow you to start investing with a monthly sum starting as low as Rs 500. Remember, every one of us has to plan for his or her finances
3. It is only about where to invest
Financial Planning is not only about getting recommendations on where to invest. It is much more than that. It looks at your overall finances including your savings, your future goals, your risk appetite, how much life and health insurance should you take etc. Also, the plan is made specific to your requirements and there is no over the shelf product that can be taken.
4. It is a one-time activity
It is one of the most common mistakes we make. A financial plan is an ongoing activity. As we cross different life stages, there are a lot of changes which need to be incorporated in the plan including adding new goals, change in surplus, change in risk appetite, rebalancing of the portfolio, upgradation of insurance covers etc. just to name a few. Creating a plan can be considered as the first step in ensuring that you have a worry free life
5. It is expensive to create a plan
It is more expensive not to have a financial plan in place rather than getting a plan made by taking professional advice. The benefits of a financial plan are seen over a period of time. However, there are also many immediate benefits like getting out of unwanted and toxic investments which are giving sub-optimal returns, starting with a regular savings habit, having a household budget in place etc. Also, one can get good financial advice at a very reasonable cost – which by the way should be considered as an investment for a bright future.
6. I’ve got plenty of time to plan for my retirement
It’s never too early to start planning for retirement. In fact, the longer you wait, the harder you’ll have to work and the more you’ll have to save.
Having a plan gives you direction and shows you your options. Without a plan, how can you even be sure when you can retire? Do you know what you’ll need to cover your basic expenses and where those funds are coming from? Do you know if you can afford to take up a new hobby, travel more, or pay off your mortgage? Do you know when the best time is to start drawing Social Security? If you plan to work part time after retirement, do you know what the earnings limits are if you take Social Security before your full retirement age? Do you know how your income taxes will be impacted by withdrawals from your retirement accounts versus your taxable investments? And how do you ensure that you don’t outlive your money?
A financial planner can help you with all of this.
7. I will inherit from my parents (or other relatives) so I don’t have to worry about a financial plan
You may be expecting to receive an inheritance. That’s great, but it doesn’t mean you don’t need a financial plan. After all, it’s unlikely that you know when you’ll be getting your inheritance, or even how much you’ll be receiving.
When we work with clients who anticipate an inheritance, we help them establish a solid plan based on what they know and what they can control, so that they’re never caught unprepared. We also look at how inherited assets are to be received (for example, in a trust that limits access for the protection of the beneficiaries or in a lump sum that may require redrafting one’s legal documents). That could make a big difference in how much you’re able to take advantage of your inheritance.