Why it needs to start early?
‘A stitch in time saves nine’ goes a famous saying which stresses on the importance of time. The same holds true for financial planning. Do you know why?
Given its importance, a financial plan is essential for every individual. It helps you in meeting your financial goals in a systematic manner and gives you financial independence. Besides being important, it is advised that financial planning should be started as early as possible. Having a financial plan early in your life is beneficial because of the umpteen benefits you can get from it. If you are wondering what the benefits are, here are some for your knowledge –
• It inculcates a sense of discipline in you
When you start earning, you find various avenues to spend your limited income on. This leads to overspending which eats away your income. You are, thereafter, left with no money to create savings which is bad. When you have a clear cut financial plan early in life you become aware of your future liabilities and goals. You also know the funds required to meet those goals. Having financial goals instils a sense of financial discipline in you. You start saving early to reach the desired corpus and develop a saving habit which lasts your lifetime.
• You can save affordable amounts regularly
When you plan your finances early, you start saving early. When you start saving early you have time on your hands. This time lets you create a substantial corpus by saving little affordable amounts every month. Your investments earn compound interest which, over time, multiplies your savings manifold. If you don’t believe me, see for yourself how the power of compounding works wonders –
The following details are assumed for calculation purposes –
Just by delaying your investments for 10 years, your corpus becomes one-third! Surprising, isn’t it? If you want the same corpus when you start late, your monthly saving should be more than Rs.14, 000 which is more than double of what you are required to save when you start early.
Thus, by having a financial plan early in life you don’t have to stress your earnings and you can create sufficient funds for future.
• You can save more and avoid debts
When you start saving early you get longer investment tenure. As demonstrated above, this longer tenure, coupled with compound interest yields very high returns. Thus, you can create sufficient savings for your life’s goals. When you have good savings you don’t have to take loans or debts to meet your financial liabilities. You can utilize your investments and avoid paying interest payments on loans.
• You can learn from your mistakes
Making mistakes is common. You might make mistakes when you are new to the financial sector. You are learning the ropes and you create a financial plan which, according to you, gives you financial security. However, if your financial plan falls apart, you have a time advantage. You can take rectifying measures and rebuild your financial portfolio. Since you have time on your side, rebuilding another financial plan would not put a dent on your financial goals. You can learn valuable financial lessons from your mistakes and plan your finances for the future more carefully. Thus, early financial planning lets you rebuild your financial portfolio and your mistakes don’t prove financially hazardous.
A financial plan is necessary to handle your finances better. Ideally, you should resort to financial planning when you start earning. However, even if you have been delayed in formulating a financial plan, don’t wait any longer. Start at the earliest and reap the benefits of having a good financial plan to back your goals.
Investment in securities market / Mutual Funds are subject to market risks, read all the related documents carefully before investing.