If there is one reason why some individuals are more successful with their finances it’s because they are acting on the right financial planning tips. And the best financial planning tip out there is – start early before it gets too late.
When it comes to doling out financial planning tips, there is no one bigger than Warren Buffet – the highly regarded investor guru.
When asked in a TV show about ‘the biggest mistake we make when it comes to money’, this is what Warren Buffet had to say:
“Well, I think the biggest mistake is not learning the habits of saving properly early. Because saving is a habit. And then, trying to get rich quick. It's pretty easy to get well-to-do slowly. But it's not easy to get rich quick.”
When it comes to saving there cannot be a bigger mistake than postponing investing. Individuals often underestimate the importance of time in amassing wealth. They assume wrongly that they can always make up for lost time in the future.
So if you are looking for financial planning tips, look no further than these three ideas.
The Sowing stage
Yes, you are in your mid-20s and have just received your first salary. To start thinking about retirement right now does sound like a bit of a drag. But starting early allows you to save that little bit more and with smaller amounts as well.
The ability to save at this stage is higher as you have little or no responsibilities. So, channelizing a part of your newfound cash flows into a retirement corpus is just ideal. Also, it is a big help at the latter stages when the responsibilities are more.
Accumulation stage
Upon marriage, consider adding term life risk cover policies for income protection. Also, start planning for a house, if you need one. A housing loan at this juncture will be not a burden as expenses are still not so high. Once you have children, expenses are sure to spiral.
Also, this stage is initially marked with marriage and then with children. With children, you will need to start investing towards their education and marriage as well. This is one of the most financially challenging periods in one's life, since demand for expenses as well as need for investment for various goals is at the highest point.
Empty nesters
As you approach 50, the situation could have taken a dramatic turn. The children might have left to complete their higher education elsewhere. And to fund this, you would have started drawing out from their education corpus.
Since investment for children's education goals have ceased, you can use the extra sum to retire any existing loans. Moreover, this an opportune time to take a final call on your retirement plans and other goals post-retirement.
Harvesters
You have retired now. And there are three important things that you need to keep in mind; regular income, capital protection and liquidity.
Accordingly, put a large part of your retirement corpus into fixed income instruments, like senior citizens' savings scheme, bank fixed deposits or fixed maturity plans of mutual funds. If you want an equity exposure, it should be marginal, through monthly income plans or balanced funds.
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