While proper financial planning is a subject in and of itself, in my experience if a person can avoid a few basic mistakes which I have listed down, then one considerably increases their chances of material well-being. Here is my list
Absence of a clearly defined goal: We all have multiple goals in life for which we need to save. Buying assets, Childs education, marriage, our own retirement. A common problem I see is that people have not written down exactly what do they want and how are they saving specifically for the goal. Each of the above goals has a different timeline and risks and accordingly saving plan has to vary.
Trying to save post expenses: We see so many people who believe that they simply cannot save. The expenses are too great. The mistakes made by people are that they try to save from what is left AFTER spending. That does not work. Your expense should be accounted for AFTER you have saved.
Not taking professional help: In case their car has a flat tyre or they have leaking tap people will not change it themselves and instead rely on mechanic or plumber. But when it comes to planning for their future and well being they try to do it themselves. I find it amusing and sad. Fact of the matter is that the financial world has become so complex and risks are so varied that it is beyond the capacity of most people to plan their financial future. Do not play with your future. Please draw your savings plan with a help of professional advisor.
Not taking risks into account: When planning for future are you accounting for what all can through your planning off the track? Death, Disease, Disability can all have a devastating impact on your goals. Untimely death & health expenses are the leading causes of bankruptcy in our country and yet very people seem to plan for these. Sound financial planning takes these factors into consideration and protects you against economic impact of the same.
Not reviewing progress: If a person does all of the above then he has taken a giant step towards securing his financial future. However all of the above will come to a naught if the progress is not reviewed periodically. At least set a couple of days every year to review how you are doing against the plan. Minus of this you will be playing blind. Not a good idea.
In essence what I would recommend is please be pro-active, seek professional help and be involved in the process of planning for your future. I am reminded of an old dictum failing to plan is planning to fail. Make sure you don’t fall prey to it.
The author is EVP & Head of Agency, Max Life Insurance