Have you ever thought “Why or when should I start retirement planning?”
Unfortunately, few people succeed in building wealth into the future because it has little to do with understanding simple principles and everything to do with actioning the same. With the internet giving plethora of information on investing, mutual funds, stocks, bonds and so on, the challenge does not lie in equipping ourselves with this knowledge, but in translating this acquired knowledge into action and therefore results.
Most of us do lack financial literacy. We could get lured away by anecdotal evidence or advice which quickly comes out from friends or relatives that we may act upon. Most of us are quite consumed in life that we tend to ignore those key aspects of financial planning and do not plan for the future needs.
At some point of time, we all have to stop working and the years ahead then will still require money for food, clothes, travel and so on. Where is the source for all this money? This question may not arise during those years when all these expenses do exist but you are in a job and those later years don’t occur to us in such a busy schedule occupied by house, kids, parents and many other issues. All this calls for systematic financial planning early.
The first requirement is that before you go to a financial adviser it is important to list down everything about what you have and what your liabilities are. This could probably be the starting point.
The next step is obviously to write down what you earn every month and how much you could set aside every month in order to plan for the future. It is important to see those big expenditures that could occur down the line basically your down payments on your home loan, your kid’s college admission, your daughter’s marriage and also probably reserve an amount for some-thing unforeseen.
If I do not intelligently invest a considerable portion of what I earn, what would be the outcome with my savings? After x years from now? Not many of us think about inflation your money will decrease after many years in its purchasing power. What INR 100 can purchase today, it may not purchase the same thing in the future.
All of us need to retire from work at some point of time. If we do not invest our money, we will never be able to create a corpus of money we can rely on, and will never be able to get free from our work unless we are person who says “I love my job. I will work till I die”
There is a need to not just plan but translate the plan into actionable rules that you will live with. Time spent writing goals and building a step-by-step plan to achieve those goals is an investment in your future.
Once you get these basics, take your advisor’s help in doing a risk profiling. If you already have all the basic already met for, then you could take slightly higher risk. If not, do choose low risk investments. While at a young age, you can afford to be less conservative, you still need to know where you stand. If your needs are more than what your earnings can provide for, then your planner will end up advising you instruments that are highly risky and you will end up in a soup. It is best to match our future needs to what we have. That is the only way to enjoy those later years peacefully.
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