5 Biggest Financial Planning Mistakes That You Should Avoid
Till 40, I’ll work very hard and save a lot of money. Next 10 years, I’ll travel and cruise. And then at 55, I’ll officially retire.
We live in a real world and things are easier said than done – as fluent as this plan sounds, it has risks breeding on it. Why? Because, first, your life isn’t that straightforward; and second, uncertainties are always a big (and exciting) part of our futures. The question if the pieces will fall in the right places is always tagged along with a big “maybe”. And incorporating this ‘maybe’ in your future planning is very important.
How financially stable does your future look? Do you have everything worked out for yourself?
When mapping their financial plans, many people make some very common mistakes that eventually turns up to be fatal when that future arrives. Here are 5 of such most common financial planning mistakes:
1. Not factoring the economic trends and risks
The real value of your savings won’t remain the same in the next 5 years. With the changing inflation, infrastructure and interest rate, the value of your money will depreciate. So it is very important that you factor such economic trends and risks when planning your future finances.
2. Too much vagueness
If you’re looking to turn your future exactly like your wish, your plans must be kept off the vagueness. Guess works will never help; bring clarity and definiteness to your facts and figures. Don’t hang up with “maybe” figures but do thorough research to find hard figures. The more certain you are with your earnings and returns the more efficient will your financial plans be.
3. Not keeping a budget
Financial planning and budgeting go hand-in-hand. To strike a right balance between your income, savings and expenditure at present and in future, you must stick to a short and long-term budget. So if you don’t already have one, work out a nice budget for the next month, year and decade.
4. Depending on potentials
Maybe your stock will yield this much money, maybe your provident fund will increase, maybe you will win a big lottery. When you’re depending on your return or earning potentials, you’re building a castle in the air. Factor real facts and numbers that are guaranteed and not prospects.
5. Not investing in assets
Your bank savings, stock market investment and more are great. But investing (and protecting) assets are even more rewarding. Have a life and health insurance; get your car, home and business insured. Keep a big emergency fund aside. These are assets with a very long-term value.
Of course, there are plenty more mistakes that people make when planning the financial-end of their future—the mentioned ones are the most common. So when connecting dots forward for your future, avoid these minor and major hiccups in your financial planning to enjoy a prosperous life.