The DOs and the DON’Ts of Financial Planning
The Dos and Don’ts of Financial Planning
We all have heard about financial planning. How it helps us to secure our finances and lays a strong base for our future. There are many blogs and stories out there to show how a strong financial planning helped people achieve their goals.
But what many of these stories fail to tell us or rather are unable to convey clearly are the actual Dos and the Don’ts of financial planning. And that’s what we are going to see here.
I am not going into the details of what is financial planning and its importance in your life. It’s pretty obvious. So let’s just skip that and address the elephant in the room!
The DOs of Financial Planning
1. Think of doing financial planning:
Well, it’s a bit obvious but the most important one. You must be prepared to do financial planning in the first place and ready to secure your future. It is one of the most effective ways to reach your aims, life goals and you must be firm on making it work.
2. Set Goals and work for them:
The whole point of financial planning is to reach your goals and thus setting one (or more) is the first task. It can be anything like buying a house, a fancy car or planning a fancy wedding. It all starts here.
3. Do your homework:
Before jumping up to make a complex and thought-out financial plan, you must do your homework about your own finances, market trends, basic financial terms like taxes, risks & liabilities, etc. There is enough information available on the internet that will give you an ample idea about all the things mentioned above.
4. Visit a financial consultant:
It is always good to have a professional opinion on a subject related to your finances. You may create your own plan according to your needs. But it is good to have a professional look through it once just to make sure it is correct and matches your goals.
5. Be confident about your decisions:
Executing a financial plan is never a cakewalk. Once done, ensure that you regularly review monitor your investment plan. There will be ups and downs during the time but you need to keep faith in yourself and your decisions. Stand by your financial planning and you will reap the benefits of it!
And now the DON’Ts
1. Thinking TOO Big:
The whole point of financial planning is to dream big and achieve it. But many times, people think too big. They set highly unreasonable goals which are near impossible to achieve and thus, defeating the purpose of financial planning! One of the main reason behind this is a lack of knowledge about their finances.
2. Rash decision making
As said above, seeing out a financial plan is not easy. There will be times that you might find that things are not going the way they are planned. In such cases, you should avoid acting instinctively and patiently analyse the situation. For example, pulling out money from an investment because of short-term loss may not be wise. You need to be patient, analyse the market (or make your advisor do that for you) and check if it is a temporary situation. The same fund can generate better returns in coming time and you may regret pulling out in the first place.
The key here is to be patient and analyse the situation. Rash decision making hampers a good plan more often than not.
3. Concentrating on just making money:
Being financially secure is a big part of your future planning but that just not it. You should avoid concentrating only on making money. Financial planning has other aspects such as managing your wealth, planning for tax, insurance, planning for retirement etc. You need to focus equally on all these aspects as well.
4. Being complacent
You have made a plan. It is working well. Good work! But you can’t and should not be complacent about it. You need to keep regular tabs on your plan. Making changes whenever necessary with proper consultation.
5. Wait for some crisis:
Now why would you want to do that? Start planning early and be well prepared for any crisis that may hit you. Isn’t precaution always better than cure?
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