5th October 2022
World Financial Planning Day!
World Financial Planning Day was held to raise awareness about the importance of financial planning.
Doctors, lawyers, architects, CAs, career counselors, medical counselors, physiotherapists, gym trainers, and nutritionists are available in every city or online. Why should I visit them? It might be a silly question to you but ask this question yourself. It is difficult to move in life if you don’t know the “Why” factor in any decisions you take.
Yes, the obvious answer is to take professional services from them. These experts help us in different areas of our life. We also take the help of drivers, bike mechanic, travel agents, caterer, etc., to make our life easy and do the work as we wish.
Most people think they can do all the work the professionals do. Whether designing the building or doing physiotherapy services, you need an expert in a particular field. Out of all the professional services or expert advice available in the market, some of these jobs we can do ourselves. But we are not experts in a particular field. Still, others require special knowledge and expertise. And also, you need experience hands in specific areas.
For example, if there is a problem with the car, most of us will be puzzled. There is no alternative to driving it to the garage and getting the trouble repaired. Just imagine without these professionals, our life would come to a grinding halt.
Delaying Professional Help
25-year-old Mr. Chulbul’s monthly expenses amount to Rs 25,000, and he needs to build a corpus of Rs 3.70 crore to meet his retirement expenses 35 years later. (Suppose the Inflation rate is 5% pa. and equity investments return 12% pa and fixed instruments @6% pa.)
To build this targeted amount, he would have to invest only Rs 6,716 monthly in equity-oriented investments over the next 35 years.
In this case, the power of compounding and disciplined investment would ensure he achieves his requirement. But if he delays this action and starts after ten years, he would have to invest Rs 21,742 a month for 25 years to complete the target amount.
Just imagine the Cost of delaying. Mr. Chulbul has to invest more monthly amounts to achieve the target corpus. Yes, it’s a simple calculation; you can do it.
The additional outflow cost for delaying retirement planning by only ten years is Rs 18.03 lakh. (Rs. 21,742 -Rs. 6,716 = Rs. 15,026 x 12 months x 10 Years)
It is one small example for your understanding. But there are many more examples where you are paying more for the delay in making your financial plan.
Making a customized financial plan for you and your family is critical for success with money and investments and achieving financial freedom.
If you delay, you have to pay the price for it.
Imagine if you get it down to getting your written “comprehensive financial plan” done ‘someday’ instead of ‘now.’ Opportunities lost due to delay in making financial plans are called ‘opportunity costs. Please do it now!
Do It Yourself vs. Hire a Financial Planner.
People think about it and are confused about what to do. Choose between “Do it yourself” or “Hire a professional.” Some hover between “I will start now” or “I will start later.”
Yes, you can do it yourself.
But what about your investment journey in the equity market during the coming 35 years? Could you manage your investment behavior? Could you make the right decision related to the volatile equity market? Could you review your equity portfolio and take the necessary actions? What would be the tax impact during the coming 35 years tax-changing scenario? What to do if your invested equity mutual fund manager leaves the asset management company? What about the selected fund that has given negative returns for three years? Could you know your risk profile to build the portfolio? Which fund is best for you as your risk profile within 44 mutual fund companies in India? Could you know your money mistakes?
Many questions will come to your mind when doing a plan. Yes, the questions list goes on.
If you think you are an expert in this field, proceed and do it yourself.
“Earning money is easy, but managing money is difficult. Managing your money behavior is more difficult than thinking. Think twice about managing your money for another 30 or 35 years, even after retirement.” in my opinion.
One question coming to your mind is, Do you need a financial advisor?
The answer depends on your current situation, age, risk profile, the complexity of your finances, and condition. How comfortable do you manage investments? Where are you in your wealth journey? And where you’d like to be? Your decision to hire a financial planner depends on many factors. If we write the decision factors, it will be a long list.
Yes, the most important is your money habits and money mindset.
We all know that “morning walk is the best exercise,” but have you done it regularly? Ask this question yourself.
The same is to money habits. Have you developed the proper money habits to achieve financial goals and peace of mind? If yes, then you are in a happy money zone. Keep moving!
If No, the financial planner will help and guide you to make good money habits and be disciplined in the entire financial journey, just like a gym trainer.
The financial planner’s mission is to reduce the gap between where you are financially now and where you’d like to be with a realistically written strategy. You are getting the proper guidance and help from the financial planner. But there are costs involved for this service, and not everyone needs the help.
Yes, financial planners are charging professional fees for their services.
Suppose your financial planner charges Rs. 20,000/- (one-time fees) to prepare your customized “Comprehensive Finacial Plan,” which is a 60-70 pages written report. It is a realistic strategy to achieve your financial goals and financial freedom in your life. Otherwise, you can say it is a prominent Bollywood picture of your life with a real-time game plan. Making a plan is not a big thing, but implementing and reviewing the financial plan and taking necessary action during the financial planning journey.
You might consider the Cost of Rs. 20,000/-, but some of you may think it’s costlier. You are paying for it and making your financial strategy for another 30 or 35 years or till the end of life and taking the financial planner’s help. In another way, you are preparing the blueprint for your financial journey.
You are making a payment of Rs. 571 per year (Rs. 20,000/35 years), a minimal amount for your entire life’s customized strategy. Most people think this amount of Rs. 571 per year is more costly than the written financial plan and wealth creation journey. But you are not considering the money mistakes made due to the wrong product or scheme selection. Most people are not thinking about the evil scheme they don’t need, pushed by the bank relationship manager vs. the Cost of loss of time and return.
The financial plan is a truly customized value-addition to your financial journey, whether you like it or not.
“In practical situations, time and return lost by the individual due to money mistakes are more than the fees paid to a financial planner. We realize our mistakes after some years, but we are thinking about fees now.” in my opinion.
However, the financial planner will help you achieve your financial goals and freedom without making money mistakes during this financial journey.
“You made delay, but time will not, and lost time is never found again.” ~Benjamin Franklin
Financial planners are essentially personal finance coaches. They learn your current situation, prepare the customized “comprehensive financial plan,” provide the right advice, and guide you towards informed financial ways in this financial jungle.
Sometimes we have significant financial goals but no plan situation. Suppose we are in a critical debt-trapped position but no debt-free strategy situation.
Suppose you have money to invest and financial goals to pursue but no definitive plan. In that case, or to get the proper guidance in your entire life, it may be time to hire a financial planner. The right financial planner can reduce financial stress, streamline decision-making, and guide you to a happy money zone.
Yes. In the end, you will achieve peace of mind.
Plan Well To Live Well!
I am a CERTIFIED FINANCIAL PLANNERCM, CHARTERED WEALTH MANAGER®. For the moment, I have shared my experience growing up with you because it had a tremendous impact on how I do what I do. If you have a question about your financial situation, please connect me. I’d be delighted to try to be of service.
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