5 Signs That Financial Planning Is Not Your Cuppa

By | May 29, 2015

Financial Planning for a Family

As an old adage goes – “Failing to plan is planning to fail”

Financial planning is as important as brushing your teeth. While one may choose not to do it, in the long run, it may hurt as much as tooth decay would. So, just like you would rush to a dentist at the first sign of trouble with your teeth, there are neon red signs that will warn you to manage your finances.

So, are you having a good financial planning? Read this and see if you have any of these warning signs.

1. You don’t have a corpus

As we settle in our jobs, get married, have kids and grow in life, so should our money. How else do we realize our dreams of going on a world tour or buying that big bungalow on the hills post retirement? Building a corpus is painstakingly slow, but a rewarding process nevertheless. But if you are not having one yet, it is the first sign that you had a poor planning. No matter how young you are.

Those small initial investments may seem insignificant at first. But a disciplined investment and compounding effect will make sure your corpus starts building up.

2. You don’t have a contingency fund

There are many uncertainties in our lives and there are multiple tolls that we pay traversing through the highway of life.

They can be in the form of your health, your loved ones’ health, financial insecurities, rising costs, competition and everything in between. So are you prepared to meet those? Or you think that you can break your FD when something comes? If so, this is the next warning siren.

How about having a secret piggy bank to help you in those tough and uncertain days? A highly liquid contingency fund set aside will help you to take care of such issues with ease. Ideally, this is a ‘stash it – forget it’ fund that you can keep in your bank account or in a liquid fund.

3. Car Loan, Personal Loan, Home Loan, Consumer Loan – you have all of these

Loans are as easily available these days, all decked up with attractive repayment plans and schemes. It may sound ok to have a couple of loans that you can service without a huge dent to your monthly planning. But one must be very careful about the interests. Multiple loans at high interest rates are loud chimes from the lighthouse that your boat is about to hit.

Steer your course safely by closing those higher interest rate loans first, and then consolidate the number of credit cards you use. Loans like personal loans and credit card loans charge as high as 24% interest rates, enough to kill your finances!

4. You have invested 50 Lacs in stocks

While the temptation of high returns has a magnetic pull, it is good to remember that it is accompanied by high risk. Putting all eggs in one basket is convenient, but if it falls, one would end up in a yellow slimy slush.

Diversification brings in stability. It is a good idea to spread funds in fixed deposits, mutual funds, equity and metals. Allocation should vary with your risk appetite. But remember, there is no gain without risk, but too much risk may lead to losses.

5. Living on Rent

It is not the worst thing to live on rent. With the property prices in major cities at an all time high, at times it sounds like an option. However, with the added pressure of rent and high security deposits that come along with it, not planning your finances for a buy is calling for trouble. With a significant portion of your income going into rentals, it is best to efficiently manage owing one.

After all, property prices appreciate over time!

If any of the above sounds anything like you, it is time to start watching how you spend your rupee. It just needs little time and discipline.

And who doesn’t like to have few more green bucks in pocket?

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