Common Mistake in Financial Planning

From the desk of Mr.Nirav B.Lekinwala

Certified financial Planner,

Director,

M S Multiwealth Advisory Pvt. Ltd.

Common mistakes an investor make when seeking financial planning advice

There is an awful lot of confusion about what financial planning is and what it can do for you. Some people think that professional financial advice is for rich people only. Others believe it is something you don’t have to start worrying about until around 10 years before you retire. And many suspect it is just an investment fund selling mechanism. As a result, one or more of the following myths examined below could be preventing you from using a financial adviser, a mistake that could cost you hundreds of thousands of rupees in future prosperity and financial security.

Financial Planning is only for the rich.

Financial planning is essential for everyone. Anyone who has many needs and limited resources should go for it. Very few can consider themselves too rich to engage in financial planning. Limited income and savings can be invested efficiently to achieve financial goals.

Confuse financial planning with investing.

While a high savings ratio is important, what is equally important is effectively investing the same. Investing should always be seen as a means to achieve certain pre-determined goals.

Neglect to evaluate their financial plan periodically.

Financial plan once prepared has to be regularly reviewed to ensure it remains on track and properly reflects your changing needs and circumstances. This review should include:

• A discussion about changes in your personal circumstances and how they might affect your goals.
• A review and evaluation of the impact of changing tax laws and economic circumstances.
• A review of your life circumstances and an adjustment of the recommendations if needed as those circumstances change through live events such as birth, illness, marriage and retirement.

Neglect to set measurable financial goals.

A good financial plan must have the following attributes :

• Goals should be specific.
• Goals should be realistic.
• Goals for the whole family.
• Goals should have approximate target dates.

Think financial planning is the same as retirement planning.

Retirement planning is the process of arranging your finances so that you can retire comfortably and securely. It means setting realistic goals for retirement. A vision of what the retirement income should be the standard of living to be maintained etc. Retirement planning is a part of overall financial planning. The most visible reward of undertaking Financial Planning is secured retirement.

Don’t understand that good professional planning advice is largely dependent on good information from clients.

Consider a visit to your doctor. Without complete and fully accurate details, your doctor cannot prescribe the best course of action. The same applies to financial planning. In order to obtain the best service for your ‘financial health’ all details and specifics must be disclosed.

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Believe financial planning is primarily tax planning.

The objective of tax planning is to reduce, shift or defer taxes so that you can maximize your post tax income. Where as the objective of financial planning is to provide for financial need that may arise in future.

Think they’ll lose control over their decisions if they use a planner.

Some goals are short term in nature, while some are long term. Some goals are high priority, whereas some are low priority. Financial planner will help you to priorities different financial goals and help you to allocate resources to achieve financial freedom.

BE FEARFUL WHEN OTHERS ARE GREEDY AND

BE GREEDY WHEN OTHERS ARE FEARFUL