What are common myths about Financial planning?

Short Answer

There are several myths such as financial planning is for the rich, financial planners can solve all my problems., qualifications don't matter, its DIY things, its mid-aged or old people, not for women and more. Such myths should be avoided, and facts should be dealt upon to get successive outcomes.

Detailed Answer

With evolving economic and financial landscape financial planning and financial planners have been steadily gaining attention in India. With liberalization,economic opportunities improved for individuals and Indian employment profile moved from majority public sector to private sector which resulted in reduced state-sponsored retirement benefits, increased incomes and low job securities etc.

Simultaneously as economy opened up new avenues of investments opened up. Capital markets became better regulated, efficient and safer to invest. Eased regulations resulted in more avenues for investors to invest, with these changes requirement of professional help as well as a structured approach to money management gained importance, hence financial planning and financial planners have become much more important in last few years.

In case you want to read more about Financial planning, read my post on Financial Planning for beginners ,with growth in a number of people interested in financial planning many myths, have become popular, keep reading as we bust some of the top myths.

1. Financial Planning is for rich

This is a myth which has been propagated far and wide. Financial planning is for rich only as they only need to manage their money, there is nothing for from truth than this. Let me get this straight "Financial planning is for everyone". In fact if you have limited resources it is much more important that you plan well.

One of the reason this myth has propagated is traditionally in India financial planners cost a lot of money some charge fixed costs in the range of 30k-50k per year which is exorbitant, but there are a lot of good financial planners available at lower costs or you can use online services which come at a fraction of the cost.

2. Hiring a financial planner will solve all my problems

Financial planner at the end of the day is like a doctor he can only advise and plan the course of action for you, finally the pills need to be taken by you. He is not going to create money out of thin air. neither he is going to get financial discipline in you overnight nor he is going to define goals for you. All of that needs to be done by you, so if you are thinking hiring a financial planner is going to be panacea for all your problems ,let me tell you one thing straight it's not going to happen.

3. Financial Planners qualifications do not matter

In India for long lot of people who sell financial products have masqueraded as financial planner/advisors which leads to not just wrong selling but lot of bad advise also. Qualifications do matter in case someone is giving you financial advise, please look for people who have formal education/certification in finance or at least experience in the area

4. Financial planning is best-done DIY- just get your basics right

Many bloggers will tell you to try Financial planning in a DIY (Do it yourself) mode, while I agree with them that with right investment of time and inclination, there are enough resources available but there is no substitute for a good financial planner, financial planning is not a one-time exercise but an ongoing process so an expert advisor at hand will always help

5. Financial Planning is for mid aged or old people

This is probably the biggest myth of all, In-fact let me say this "It is never early to start financial planning " Earlier you start better it is. To understand this there are 2 concepts you need to understand one is the financial planning process itself which is defined "As a set of actions which enables you to take structured and sensible decisions to help you meet not just your financial obligations and goals but help you deploy your money to achieve your life goals".

So, Financial planning is not something you wake up one morning and start doing it needs to be done constantly over an individual lifecycle. Second concept is compounding and creating assets over long run, time multiplies your money faster than you think and hence starting early gives you lot of leeway, starting early also lets you take higher risks, as a result, you can expect higher returns

6. Financial planning is not for women

This is another big myth which has been propagated,financial planning is for both men and women in-fact women require it more than men please read my post on 10 Tips for Financial planning for women to know why financial planning is essential for women

7. Financial planning is same as investment advisory

Investment advisory is just one part of financial planning, Financial planning is a broad process to assess your current financial position, do the budgeting bit, set up goals and then devise a plan ( which includes investment plan) to achieve those goals. Financial planning includes tax planning, Health/life insurance planning, estate planning ,planning for goals like retirement etc.

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Categories: Finance
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