Misconception demystify

Most of the people believe that once they have invested their savings in variety of financial products like FDs, insurance, mutual funds, equity, real estate etc. for future, their task is over. In addition some pre-conceived notions that the company where they work would take care of their family in uncertain times and pay medical and hospitalization expenses, so they need not to keep reserve. It also combines with the notion that their various life insurance policies would protect in case of their death, disability and accidents. To further compliment this notion that their expected inheritance wealth or property would be enough to get financial stability in life. Nowadays youths think that their retirement is far away and they could easily plan for it just a few years in advance.

Well dear friends, just making investments, taking up insurance policies, blessed inheritance money and excellent prospects from company could not provide for good financial resources in future. You are looking only finances invested well today but getting overlooked at the bigger picture, a holistic view of your financial matters, inflationary tendencies, your goals, liabilities, responsibilities, the uncertainties and risk associated with investments, which may hamper your personal life and finance as well. Hence, you need to have come out of this illusory financial world and plan to manage your finances to achieve your life goals, to cope up with disaster or uncertainty.

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Having Insurance Policies

You may have so many insurance policies to protect your family needs in case of your sudden demise. But the financial planning questions you, do you have adequate insurance to look after your family needs till your life expectancy. In addition, is it worth considering?, if you have enough to look after your children’s education and marriage needs considering the rate of inflation. Also is it worth considering if your family would be financially secured if they have to repay loans taken by you after your death.

Investment in different Schemes

You would have invested or investing in different schemes like in mutual funds and debt funds when there is surplus money in your account or as and when the need arises. But financial planning is again asking you, are all your investments really supporting your financial goals or not? Is the schemes in which you have invested are really performing or not? Is the maturity value from the schemes is sufficient to meet your goals or not?

Having health insurance

You may have enough health insurance and your company is giving coverage too. But financial planning would tell you 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. With fresh insurance coverage over the age of 45 being tough it is best to save for this period.

Rely on inheritance money

You might be getting inheritance money or your parental business, you think you are blessed hence you will not require financial planning. Inheritance has neither been a cake-walk, 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.

Your company provides retirement benefit

Your company may have enough for contribution in your provident fund and you must have reason that your retirement benefits like gratuity, superannuation fund, pension etc. would suffice for your retirement planning. Again, financial planning has questioned you, have you estimated the corpus which requires you for your living current life style in rainy days? Would these benefits sufficient to meet your contingencies at old age? The only way that one will know the amount they need for retirement is to create a financial plan that sets out specific goals you wish to prepare for, and after this you can then determine the capital you will need to set aside to accomplish your very personal goals. It is then you know the amount needed at the end of your working career, are you able to know the amount of money you will have to set aside each month to achieve the retirement you so desired.

Getting prepared for emergency

Now, financial planning is asking you that are you getting prepared for financial contingencies in case of loss of job, prolonged illness, significant of medical expenses etc.?

So all of us have to plan to make our hard-earned money to work for us, and this applies more so on 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 and deep look at our expenses and find ways to minimize them.

Who should plan?

If you have got answers for all questions and planned accordingly in this respect, I appreciate and my hearty congratulations are with you for taking the first step towards financial sufficiency. You have really done it.! But those who are still living in the illusory world or thinking that they can handle it at their own. They must have made their own calculations about their future expenses and have started planning on their own. So mark my words, their planning can never be comprehensive which will cover all mandatory aspects. Financial planning is not an end but a mean to an end of financial stability and security. Please come into light and face the reality. You might be expert in your own field but not in financial planning or investments.

Perhaps part of the reason you think you can’t afford financial plan fee because you’re paying too much in insurance premiums, income taxes, interest and investment expenses, all in which a certified financial planner can help you to reduce the same. Hiring a competent, fee-only planner to prepare a comprehensive financial plan will probably be the best investment you will ever make in your life.

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Suresh Kumar Narula

SEBI Investment Advisor, Founder & Principal Financial Planner at Prudent Financial Planners
Suresh K Narula is founder and Principal Financial Planner at Prudent Financial Planners. He has earned the professional CERITIFIED FINANCIAL PLANNER and got registered with SEBI as Investment Advisor. He writes on personal and financial planning articles and got published in Dainik Bhaskar, Business Bhaskar and The Financial Planner's Guild, India. He is also a member of Financial Planner's Guild India ( An association of practicing SEBI registered Investment advisers) to create awareness about Financial Planning in general public, promote professional excellence and ensure high quality practice standards. Suresh received his an M.com from Himachal Pardesh University and an MFC from Punjab University, Chandigarh. He can be reached at info@prudentfp.in
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