“If you fail to plan, you are planning to fail.” – Benjamin franklin

We plan so many things in our life, our holidays, our marriage and children. Then why not plan our finances?

Money matters are complex and intimidating. They warrant putting together a comprehensive plan to manage them.

1. When to start financial planning

As soon as you start earning is the answer! Just like it is beneficial to inculcate a savings habit early in life, same goes with chalking out your financial plan.

2. Benefits of starting early

There are several benefits of starting to plan early on in life. Firstly, it provides you with a clear perspective on your short term & long term goals & also helps you chalk out the map towards reaching them. The earlier you start planning, the lesser the amount to be set aside each month due to the power of compounding. (We will learn more about power of compounding in the coming section)

• Helps Beat Inflation – Planning early provides a shield against rising inflation. You advisor can suggest avenues of investment like equity; mutual funds etc. that help you beat inflation.

• Benefits of power of compounding – By starting early you can get a bigger corpus by investing a small amount of money regularly.

‘A’ starts investing for his 60th birthday at the age of 40.
Assuming returns of 7% and a monthly investment of Rs. 1000, his total corpus at the end of 20 years will be Rs. 5,28,000.

‘B’ starts investing for his 60th birthday at the age of 20.
Assuming returns of 7% and an investment of Rs. 1000 per month, his total corpus at the end of 40 years will be a staggering Rs. 26,56,436 — almost 5 times the corpus accumulated by A.

Regular investments spread over longer durations yield greater returns and profits.

• Peace of mind – when a qualified advisor manages your finances, you do not have to worry about sporadic market movements or constantly monitor your positions. Your advisor does this for your & re balances your portfolio when the need arises to.

• FIRE – We all have heard about the FIRE movement. FIRE starts for Financial Independence Retire Early. Several millennials especially in western countries have started to quit their well-paying but stressful jobs to retire in their 30s and 40s to enjoy life and live it on their on terms. They do so by carefully planning their expenses & aggressive savings to build a retirement corpus that lasts for a lifetime. Even if you are not the one to believe in this choice, planning on building a sufficient retirement corpus is a sensible choice to make. Your financial advisor will help you do this after considering various factors.

3. The first step towards financial planning

Chalking out SMART goals is the first step to planning. SMART means Specific, Measurable, Attainable, and Realistic & Time bound. E.g. – I want to buy a house after 5 years for a budget of Rs. 3 Cr is an example of a SMART financial goal.

All of us love planning our vacations! We first decide our destination and then start putting together a laundry list of things keeping that destination in mind, like mode of transport, relevant documentation, appropriate clothes and shoes etc. Making your financial plan is no different. Once our goals are fixed, we can determine the savings that we need to generate to reach that goal.

4. Why do I need expert advice? Can I ask my friends or relatives for “free advice” on which stocks or mutual funds to invest in?

Let’s remember this – “There are not free lunches in life” Free advice from friends, family members and colleagues can be extremely dangerous & you may end up losing your hard earned money.

Now days there are a plethora of instruments available for investments, however we do not know which one is the most suitable for us, given our risk appetite, savings & income level. Many a times we either do not have the knowledge or the time to research various aspects of the instruments or the sector/company where we wish to invest our hard owned savings.

This is where an investment advisor steps in. Just like a doctor is an expert who examines your body & gives you the right prescription, an investment advisor examines your financial situation & provides you with the most suitable investment avenue.

A financial/investment advisor not only guides you with the best options he goes one step further to assist you in complete execution of the plan that makes your investment journey easier & smoother.