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Why should you plan your finances in advance?

Why should you plan your finances in advance? - Aegon Life

“You should begin to save for your retirement with your first paycheque.” This line has been said by many and it couldn’t be truer.

Many of us are used to thinking that financial planning and saving for the future only begins in the later part of life. However, the earlier we begin, the better we will be after retirement, when the fixed source of income – your salary, is no longer available.

With today’s tough economic climate and rising inflation, being prepared for any financial calamity is the best thing we can do for our careers and life. As soon as we begin to work, we need to have a thorough talk with ourselves to understand our financial goals. It’s easy to set financial goals early in our 20s and 30s. Setting financial goals early will ensure you align your life to a certain way which will help you meet your goals with ease.

An important financial goal for most is a self-owned house. A simple 1 BHK is the Andheri suburb of Mumbai can easily cost 1 crore. Keeping inflation in mind, the cost will definitely shoot up in the next few years and may reach INR 3 crore. If owning a home is you goal, you need to align you financial strategy to include aggressive investment options like equities which give higher returns. This is to ensure you save enough money to come close to making your dream a reality.

An MBA is a foreign B-School averages can range from INR 45 lakh to INR 90 lakh, now this is a huge amount. Five years later, it will definitely be around INR 1.3-.1.5 crore or more due to rising inflation. While there is the education loan facility offered by banks to fund your studies, how do you align your financial methods if you had around three-five years before you attended B-school?

Such instances are a good way to get clarity on how you want to take care of your finances so that you aren’t defeated by inflation.

One of the major goals which you should keep in mind is retirement. We often leave the thought of retirement out because we don’t consider it important when we are young. However, we couldn’t be more wrong. The case of Sameer will help us understanding retirement planning in a better way.

Sameer is 30 years old and works in Mumbai and earns INR 40,000. Out of the 40,000; the bills and rent take up nearly INR 20,000. He sends INR 10,000 back home and is left with INR 10,000. Now, Sameer takes the amount he is left with and puts it into his savings bank account where he earns an interest of 4-6%. This interest isn’t enough to help Sameer beat the rising cost of inflation and won’t help him in successful retirement planning.

Sameer needs to become prudent with his money and invest it in schemes which give him good returns, owing to the power of compounding. Sameer can diversify his investment portfolio with aggressive options such as equities and mutual funds for high returns and savings plans such as life insurance plans, endowment plans or guaranteed return plans. Once Sameer comes near the retirement age, say 50, he can invest in retirement plans such as Aegon’s Life Insta Pension Plan which ensures he receives a continuous income post retirement for the rest of his life, thus allowing him to continue in lifestyle, even when there is no regular income coming from salary.

Like Sameer, you too can plan goals, follow them, invest in various schemes if you can follow one thing. That’s financial discipline. It’s good to inculcate this discipline when young. Learn to control your expenses if they are too high. Remember this golden rule: Salary = Spend what is left after bill payments and essential savings.

One of the best things you can do to learn financial discipline is to read. Follow financial newspapers and magazines, read blogs on managing finance, and also one of the best things to do is to learn and read the various brochures of financial instruments. It will help you understand the minute details of such schemes and you can then make an informed decision.

In a nutshell, planning your finances in advance through education, discipline, savings, and investments will ensure that the rest of your life is able to sail smooth. A financial cushion helps you to not worry all the time about managing your responsibilities.

Place such as Aegon Life are best suited for young professionals who want to become smart with their finances. They have experienced professionals who can advise you and make sure you take the right steps.

 

 

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