Financial planning is a must and most of us try to plan our finances for a happy and worry-free future. Well, are you among those who are planning and yet not able to receive your financial goals. This is quite possible as what you are doing may not be 100% accurate and it may need to be corrected somewhere. When financial planners were asked about this, they said, now most of the people plan their finances but when they ask their clients they spotted various financial mistakes, which need to be corrected for better results.
Top 5 Financial Mistakes
No Track of non-recurring Expenses
We all have a track of our regular expenses like our home rent, electricity bills, grocery, etc. but when it comes to non- regular expenses such as medicals bills, shopping are generally untraced. This is one of the major mistakes which most of us make while planning our finances.
When we plan our budget, we should include these expenses at that time only. Though these are non-recurring expenses but having an estimated idea and planning for it before only can make lots of change.
Investment without Purpose
Most people simply invest their money without any defined purpose of their investments. Relying on friends, family, bankers and the most important one the insurance agents is the common reason behind this. People who invest like this has the risk of being mis-sold investing products that they may not need.
Hence, it’s important to be careful and know all the terms, conditions, benefits of the product that you are buying. As when you buy a product a later you want to discontinue it, then it is totally a loss for you as most of the companies have some lock-in period and they don’t return the full invested amount even.
No idea of Where they Stand Financially
We are so occupied with our lives nowadays that we have no idea about many things, among which personal finance is the one. One of the principal undertakings that a financial advisor does while handling their client is investigating the Client’s funds to know what they are doing financially.
The after-effects of such investigation are- a greater portion of their clients had truly no idea about their money related standing. A large portion of their customers had either thought little of or overestimated their accounts. Some think they are shorted, while others are stressed a lot over their funds though they stand at a decent position monetarily. More importantly, having a clear idea of where you stand financially helps you to plan your future finances well.
Mixing Term Insurance & Investments
Term Insurances are financial instruments which provides cover to you and your loved ones when you are not there. Against an insurance policy you need to pay premiums. All term insurance policies are one of the investment options.
But all investment channels do not provide cover, but for sure gives a return on investment to you.
People invest to enjoy returns during their lifetime, but buy insurance to provide cover to the family after their demise.
Generally, people mix both investment and term insurances together. Both should be accounted separately, as the returns and purpose of both are in contrast to each other. Generally, investments come with risk, some with more and some with less. Analysing your financial status is a must before you opt for a risky investment. Your financial status will decide whether you can afford to take a risk or not. Investments such as mutual fund SIP is considered for maximum returns with a minimum of risk involved.
Not Planning for Retirement Seriously
Whether you are working in the private sector or a public sector, you have to retire one day. And planning your finances for retirement is a must.
Most of us think that our contribution to PF is sufficient for life after retirement. But this is not at all true. Your liabilities may reduce but expenses are somewhat similar as you can’t cut down on your expenses when you retire. Hence one should start planning for retirement and the contribution towards it should be more than PF. To do so, one can open PPF accounts with banks which gives your maximum returns, opening PLI accounts or FDs in the post office is also an option. Moreover-investment in mutual funds and all for a long time can also provide you good returns for your life after retirement.
Even a single mistake in your financial planning can stop you to reach your goals. In case you are not finding your planning impactful try to hire a professional financial advisor so that he/she can help you. Paying attention to the above-mentioned points can also help you to correct some of your financial mistakes.