While it is true that the younger you start the more beneficial the process will be, financial planning is worthwhile at any age. Although younger people may have more decisions to make regarding their financial lives, changing laws and circumstances can lead middle-aged people and seniors to have to adjust their financial plans as well. Changes in tax law, for example, may require many people to revisit certain investments or estate plans, and adequate disability planning becomes more important as people age.
How much is enough can only be determined after you do your need analysis in a scientific manner.
I have enough assets to take care of my needs:-
What is termed as an asset is itself a debatable issue, however generally an ‘Asset’ is “what produces an income for the holder.’ And if left unmonitored assets could lose its value due to market forces and may be insufficient to fulfill the needs when they arise.
I can always borrow when I need to:-
Borrowing of money depends on various parameters such as interest rates, repayment capacity and eligibility which may change from time to time and is independent of the timing of requirement. Therefore complete dependency on borrowing is not recommended.
I don’t need to think about retirement, my kids will take care of me:-
Every individual has his/her own priorities which are more or less decided by circumstances. In such a scenario, it is always advisable to build the nest before it rains instead of depending on someone else, even if that someone is your own child.
My business will take care of me :-
Business is one of the most volatile sources of income. There are many governing factors such as recession and liquidity in the market which could adversely affect the profitability of a business. Therefore it is recommended to avoid excessive dependency on one’s own business and create a parallel passive source of income through an appropriate investment portfolio sufficient enough to provide for the financial goals.
I do enough investments to save tax:-
Investing to save tax is the most popular practice prevailing in India. No doubt that is one of the strategies of tax planning. However, many a times such investments are done without analyzing the instrument or the financial objective.
My business will always be profitable, so I reinvest all my income into my own business :-
As the old adage says, don’t put all your eggs in one basket even if the basket is your own!! Therefore reinvestment into one’s own business should be after budgeting for creation of an appropriate investment portfolio sufficient enough to provide for the financial goals on a year on year basis and also after taking into consideration one’s life stage.
I’ll always have my job:-
In the current economic situation, job security is a very distant dream. Almost surely you would get another job, however, there is no guarantee of similar income being replaced in the new assignment and what about the period in between these jobs when there is no income and only expenses? Would you be able to sustain your current lifestyle?
I am insured :-
Insurance is just one aspect of financial planning. In addition to checking whether you are adequately insured in a scientific manner, we should also take care of the various financial goals in a systematic way by making sure that adequate cash flows are available at the right time.
Can I do my own Financial Planning?:-
Some personal finance software packages, magazines or self-help books can help you do your own financial planning. However, you may decide to seek help from a professional financial planner if:
§ You lack expertise in certain areas of your finances. For example, a planner can help you evaluate the level of risk in your investment portfolio or adjust your retirement plan due to changing family circumstances.
§ You need to infuse more accuracy in what you have done for yourself
§ You don’t have enough time to spare for doing your own financial planning. Visit : www.shreewealth.com
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