The next time you are at your office or at a social gathering, observe the mid-sections of people around you. A majority of people in India are overweight.
Here are some thoughts which people have:
- I am fat. I need to lose weight.
- I am healthy but I could be slimmer
- I am getting married soon – I need to look my best
- I need to get rid of my baby fat
- etc etc
And here are some actions which people take:
- Google for information and go on a crash diet
- Buy various books on losing weight
- Try and eat healthy
- Join a gym and start working out
- Join a gym and hire a trainer
- Visit a professional dietician to get a diet plan
- etc etc
After googling for free information, trying out various methods, paying for a gym membership or a diet plan people see varying degrees of success.
However, the ones who really make headway are those who follow a proper diet plan, exercise regularly, follow portion control and have a focussed approach – More importantly, they make it a priority and stick to the stuff that needs to be done.
Managing and growing your money successfully is similar to losing weight – Just like with a Diet plan, you will do better if you have a Financial Plan.
- I am not earning enough. I need to get a better job
- I am not saving enough. I need to save more
- I need to find the best place to invest my money
- I need to buy a life insurance policy
- I need to get that health insurance policy
- I need to save to buy a house
- I need to save for my children’s future
- I need to save for my retirement
- etc etc
- Ask their friends and family what to do
- Read books, magazines and Google for information
- Get confused and end up not doing nothing
- Let money lie in a savings bank account
- Some create a fixed deposit
- Some end up buying Mutual funds
- Some end up buying direct stocks
- Some make regular contributions to PPF
- A lot of us end up buying Insurance policies
- etc etc
Most people are focussed on earning more money than managing and growing their existing money. They get a jolt or wake up to the need to invest better when a life event like a marriage or a baby happens. Or when they are neck deep in debt.
This is where a Financial Plan helps you. Just like a diet plan for your weight loss goal a financial plan helps you grow your money better.
How does Financial Planning help you ?
- Gives you a snapshot or your income and savings – And how you can optimize it further.
- Forces you to think about the important things in life that matter to you
- Creates a plan to invest your savings in modules to achieve milestones. For e.g.
- If you plan to buy a house in 5 years, how much should you save per month
- If you want to retire early how much would you need to get a stable monthly income
- If you want your children to study abroad how should you plan for the expense
- It takes care of the essentials
- Life Insurance – Will your family have enough money if you died tomorrow ?
- Health Insurance – How to select the right plan and what to watch out for
- Emergency Fund – Do you have one and is it sufficient
- And all of this will be personalized for your needs.
Most importantly, you will learn a lot about different aspects managing your money and know stuff that you weren’t probably aware of but should have been.
The earlier you start, the greater the benefit of compounding you will reap.
Is it worth spending money to get a Financial Plan ?
It is but let’s look at some numbers first (You can do this for your individual income figures)
Let’s assume you earn Rs 1 lakh a month and are able to save Rs 30,000 per month. You decide to get a Financial Plan and invest your money in a planned manner.
Over the next 5 years, even if your money grows at a balanced rate of 12% per annum, your savings of Rs 30000 x 12 x 5 = Rs 18 lakhs can grow to Rs 25.6 lakhs. Thats’ an additional 7.6 lakhs tax free income.
If you had just left it in a bank FD at 8.5% return per annum , your Rs 18 lakhs would have grown to Rs 23 lakhs.
With financial planning, you get an extra Rs 2.5 lakhs or Rs 50,000 per year.
This difference is larger if you invest for a longer term duration.
+ If we prevent you from buying just 1 wrong insurance policy, it will be way more than worth it.
If you earn money, and havent started investing with a plan for your goals, please consider getting a Financial Plan. It will be worth it.