6 financial planning myths demystified

Here are 6 financial planning myths debunked to help you make a successful financial plan.

Finance may mean different things to different people. Some assume that they need no financial planning as they have very little money. Still others believe thatonce they have invested their savings for future their task is over.

In addition some have pre-conceived notions that the company we work for, pays our medical and hospitalization expenses so we need no reserve, combined with the notion that a life insurance policy takes care of death, disability and accidents.

The need for no financial planning is complemented with the myth especially among the young that their retirement is far away and they could easily plan for it just a few years in advance. What further complements this myth is the belief that our ancestors would leave behind estate and property for us to enjoy with a will.

Well, dear friends, financial planning can never be overlooked as finances invested well today could provide for good financial resources in future. It is true that a person who helps himself succeeds best in having financial stability in life.

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About the author: Ramalingam K, an MBA (Finance) and Certified Financial Planner. He is the Founder and Director of Holistic Investment Planners (www.holisticinvestment.in) a firm that offers Financial Planning and Wealth Management. He can be reached at ramalingam@holisticinvestment.in

Have a look at the myths of financial planning:

1. I have life insurance to protect them in case of my death

My hearty congratulations for insuring your family in case of your death. But the question is do you have adequate insurance to look after your family needs for a lifetime?

In addition it is worth considering if you have enough to look after your children's education and marriage needs considering the rate of inflation. Also worth considering is if your family would be financially secure if they have to repay loans taken by you after your death.

2. I just make both ends meet, where is the need to go in for financial planning?

You may be right, but if I were to tell you that we all need to provide for financial contingencies would you say financial planning is unnecessary? So all of us have to plan to make their hard-earned money to work for them, and this applies more so single income families.

Financial planning makes sense not only to repay loans taken but also to get continuous supply of money for our needs. So we need to have a strict look at our expenses and find ways to minimize them. A small example could be to forego a pack of cigarette a day to save and invest in viable investment scheme.

3. My financial planning is done as I have invested in different schemes

I appreciate you for taking the first step towards financial sufficiency, however believe me this is just the first step to the 1,000 miles towards lifelong financial stability.

Are all your investments really supporting your financial goals or not? Are the schemes in which you have invested really performing or not? Is the maturity value from the schemes sufficient to meet your goals or not?

A financial need analysis to cover various short term and long-term needs could be best accomplished with a financial expert's advice.

4. Youth is to enjoy; retirement is far away. It will look after itself

Let us face this myth headlong. Retirement is not a contingency, but a necessity that is to be provided for right from the time one starts earning. It is advisable and much easier to start saving when young, as savings become difficult with additional expenses.

Saving for retirement starting from youth through retirement plans seems much easier when the amount to be put aside for the corpus is much less every year and it is also possible to save through various investment avenues. Starting to invest for retirement when young gives one the advantages of compounding of savings. This would also help take care of inflationary tendencies.

5. I have enough health insurance, and my company gives me coverage too

Being covered with health insurance and medical expenses at work is great, but this would not cover all your health expenses. It is always good to take additional coverage and provide for unforeseen contingencies like critical illness that would not only involve expenses on treatment, but also on maintaining the lifestyle of the family till one is ready to go to work.

Being young does not prevent you or any of your family members from getting a critical illness with the present lifestyle. With fresh insurance coverage over the age of 45 being tough it is best to save for this period.

7. I do not have to worry as I will inherit from my parents and my children will inherit from me

Inheritance has neither been a cakewalk, and a will is very important for inheritance. Financial planning involves the making of a will to avoid disputes between the heirs. Making a will is not about how big your property or estate is, it is more about necessarily making a will about the inheritance.

Financial planning is not just the forte of finance professionals alone, but is judicious and smart planning of finances for a lifetime. Lastly financial planning is not an end but a means to an end, that is, your financial stability and security.