You know how much you earn, but are you aware where the money is spent? 'I don't know where all the money goes,' is a common enough refrain among investors. The proliferation of plastic has made matters worse, for credit cards are a convenient way of slipping into the debt trap.
You could fix the problem by drawing up a household budget and establishing some ground rules about spending. However, this is easier said than done, especially if you have been a spendthrift.
If you are living beyond your means and don't have any money to invest after all your expenses, you certainly need professional guidance. A financial planner could bring order to the mess by prioritising your spending and allocating resources to your crucial goals.
2) You have insurance plans, but don't understand
Insurance is the bulwark of any financial plan, and it is critical that you understand the features of the policies you have bought. Policyholders typically know how much premium they pay every year, but don't have a clue about the life cover or extent of coverage. It's difficult to blame them because there is a vast array of choices.
If you don't know the features of your policies, you will not be able to face the disaster it is supposed to cover. A professional planner will be able to guide you on the policies that meet your requirements.
For instance, the adviser may suggest term insurance, instead of the costly endowment policy the agent is trying to push. He may suggest a basic floater health insurance policy for your entire family, instead of a critical illness plan that covers specific diseases.
3) You have no provision for a contingency
'What if' are probably the two most unused words in the financial space. There are millions of people who have made no arrangements for eventualities or emergencies.
The question they need to ask is: what would my family do if I died today? Besides buying adequate life and health insurance, an individual must also have indulged in basic estate planning.
Writing a will allows you to choose who receives your assets after your death. Without a will, your heirs may find it difficult to access what is rightfully theirs. A financial planner will not only help you draft a will, but also advise you on the most appropriate ways to distribute your assets.
4) You are not prepared for your retirement
Retirement planning should be a primary financial goal, but not many investors consider it one. They think about retirement in their 30s, but start investing only when they have reached their 40s. Do you also fall in this category? A qualified financial planner may be able to help you get started. The first step is to estimate the cost of your retirement.
This is not as easy as it may sound because there are so many variables at work. At what age do you want to retire? What is your life expectancy? How much have you already saved and what are the returns you expect to earn on it?
A professional adviser will be able to identify the most suitable investment option for you depending on your age, risk profile and expectation of returns.
5) Your investments are not linked to specific goals
You invested in a mutual fund three years ago on a friend's advice. Then you bought some gold ETFs because they promised good returns. An insurance policy was purchased during the tax saving season two years ago.
You also have some money in a mutual fund that protects the capital, as well as fixed deposits. These are a lot of investments, without any goals. Experts say that every investment should be done to meet a specific goal.
Random investment decisions lead to a haphazard portfolio. A financial planner will be able to chalk out an investment road map for you, formulating a plan to reach each of your financial goals.
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