How to Avoid Common Financial Planning Mistakes?

Date:

Trending

Want to lead your life with reduced financial stress? To achieve this, keep an eye on your financial health, along with improving your physical and mental well-being. Robust financial planning is essential for ensuring a secure future for everyone in the family. Yet, many of us make common mistakes that are avoidable. Here’s a look at some of them in this article.

- Advertisement -

Highlighting a Few Errors

Financial planning cannot be mastered instantly. It requires research and careful planning. However, once you get the hang of it, you can set up a portfolio that is in sync with your financial goals. Here are a few mistakes to avoid when creating your financial plan.

Not Having an Emergency Fund/Corpus

Whether you are salaried or self-employed, you should be prepared to tackle urgent financial emergencies or sudden requirements. How can you ensure this? By creating a contingency fund that covers at least 6 months of your necessary living expenses (including rent, utilities, loan EMIs, and medical costs). This can be gradually increased as your financial needs evolve, with ample liquidity to enable fast withdrawals in times of need.

Putting Everything Into a Single Investment Plan

Many people make the mistake of putting all their money into one investment plan. Naturally, if that plan fails to perform or does not meet their needs, it leads to higher risk. The key is to diversify your investments across multiple asset classes, such as stocks, bonds, and mutual funds, according to your risk tolerance and goals. This approach reduces the risk of major losses and ensures that you’re not vulnerable to the failure of a single investment. Real estate or bonds may not always be suitable for every portfolio, depending on liquidity needs.

Neglecting to Purchase Adequate Insurance

Not having adequate insurance coverage is a common but avoidable mistake. It leaves your family financially vulnerable if something happens to you. Make sure you have term life insurance based on income replacement (typically 10-15 times your annual income). This will give you peace of mind, knowing your family will be financially secure. Health insurance is also essential to cover medical emergencies, treatments, and hospitalisation costs. Additionally, disability or critical illness insurance should be considered to safeguard against other unexpected situations. Compare policies from multiple insurers before making a decision.

Not Investing for the Long Haul

Many of us react impulsively to market fluctuations, withdrawing investments prematurely. However, the strategy should be to invest for the long term in order to benefit from compounding and achieve higher returns. Staying invested through volatility, especially with instruments like Systematic Investment Plans (SIPs) in mutual funds, helps you smooth out market ups and downs. Be patient, regularly review your portfolio, and align your investments with your long-term financial goals.

These are some common financial planning mistakes that should be avoided. Additionally, don’t overlook the importance of tax planning and retirement planning. Utilise tax-saving options like PPF, NPS, or ELSS for tax benefits and long-term financial security, but be mindful of their different risk profiles. Inflation also erodes purchasing power over time, so consider investing in equities or other assets that typically outpace inflation. Take professional guidance from a SEBI-registered financial advisor or Certified Financial Planner (CFP) if needed. With a little homework and patience, you can build a solid financial future.

THE SNAPSHOTS, IN YOUR INBOX

Get quick snaps of everyday happening, directly in your inbox.

- Advertisement -

We don’t spam! Read our privacy policy for more info.

Support our independent journalism PayPal (Outside India) For PayU (For Indian Readers).

Krishna Mali
Krishna Mali
Founder & Group Editor of TechGraph.

More Latest Stories

More Articles

The Hidden World of Mega888 APK: What Casual Players Are Missing Out On

Mega888 APK is well-known among online casino enthusiasts for its thrilling games and easy-to-navigate interface. While many players dive in just to try their...

The Importance of Zero-Trust Security Models in Safeguarding Data

In an age where cyberattacks grow more sophisticated by the day, traditional security models are no longer enough to safeguard sensitive data. The zero-trust security model has emerged as a revolutionary approach to combat these threats. By adopting the mantra “never trust, always verify,”...

Indusface Launches CyberShiksha program to Educate Students on Cybersecurity

Indusface, a leading application security provider for SaaS solutions, has launched CyberShiksha, a national...

Crypto Market Crosses $3.08 Trn, Bitcoin Hits $91,616, Litecoin Drops Below $90

The cryptocurrency market surged to a total valuation of $3.08 trillion on Monday, with...

MoneraCap com Review: A Deep Dive into a Transformative Trading Experience

Decision that can shape your investment journey. A well-chosen platform not only enhances trading...

Gadgets: OPPO Find X8 Series to Launch Globally with MediaTek Dimensity 9400 SOC

OPPO, the world's leading smart device brand will bring the flagship MediaTek Dimensity 9400...

Pokarna Engineered Stone Limited Commits Rs 440 Crores for New Bretonstone Line

Pokarna Engineered Stone Limited (PESL) said on Tuesday it will invest Rs. 440 crore...

Coinbase launches COIN50 Index To Track Top 50 Cryptos On its Exchange

Leading crypto trading platform Coinbase on Tuesday announced the launch of the Coinbase 50...

Voice-Based AI and SLMs: Gnani Ai CEO Ganesh Gopalan On India’s Voice AI Boom

During an interview with TechGraph, Ganesh Gopalan, Co-founder of Gnani.ai, discussed how voice-based AI, built on custom Small Language Models (SLMs), improves customer experiences...

Donald Trump To Shut Department of Education; Plans To Shift Responsibilities To States

President-elect Donald Trump announced on Monday that his administration intends to close the Department...

The Trump Effect: Crypto Market Hits $3 Trillion Market Cap; Bitcoin Surges $87K, While Ethereum Stood At $3k

Following Donald Trump's presidential election victory, the cryptocurrency market surged, reaching a whopping $3.02...

INTERVIEW: Rakesh Goyal on Probus’ Efforts to Expand Rural Insurance and Navigate IRDAI’s New Norms

In an interview with TechGraph, Rakesh Goyal, Director of Probus, discussed how recent changes...
00:04:07

Protests Erupts in Valencia Over Deadly Floods in Eastern Spain

Over ten thousand people took to the streets of Valencia to protest against the...

UltraverseNFT Launches Sandalwood backed NFT for Eco-Conscious Investors

UltraverseNFT is proud to introduce its groundbreaking Sandalwood NFTs, designed to redefine eco-conscious investments by merging digital assets with tangible ecological value. These unique...

Why BITBinvest.com is Expanding Worldwide & Capturing High-Profile Trader’s Attention?

BITBinvest.com has rapidly emerged as one of the leading companies in online trading, making it a source of attraction for traders around the world. The company continues to innovate and change as it makes further expansions into the marketplace. To this end, the article examines...

4 Key Ways Robotics May Change Warehouse Operations by 2030

The landscape of warehouse operations is poised for significant transformation by 2030 with the...

VIDEO: Israeli PM Netanyahu Visits Lebanese Border, Promises Strong Action Against Hezbollah

During a recent visit to the Lebanese border, Israel's Prime Minister Benjamin Netanyahu highlighted...
00:00:33

Iran Should Not Respond To Israeli Attack: UK PM Keir Starmer

The United Kingdom's Prime Minister Keir Starmer has requested Iran to avoid retaliation after...

APP Reviews: Bengali Betting Sites

Recognizing the increasing demand for an exhilarating and convenient gambling experience in the Bengali...

Interactive Learning: Elevating Concept Clarity Through Online Education

In today’s digital age, virtual learning has taken center stage, with live online lessons...

Vehant Technologies’ Shailendra Kumar Singh On Leveraging AI To Tackle India’s Traffic Challenges

During an interview with our editorial team, Shailendra Kumar Singh, Business Unit Head ,...
00:00:00

Live: UN Security Council Meeting on Russia Ukraine Security

The members of the United Nations Security Council met on Monday to discuss the...

Rethinking IT Infrastructure in the AI era

The IT infrastructure landscape is undergoing significant changes in the AI era. Adopting AI...

UN Live: Gaza’s Right To Food & Water Being Violated

United Nations (UN) representatives Michael Fakhri, Pedro Arrojo-Agudo, and Balakrishnan Rajagopal briefed the press...

INTERVIEW: Rakesh Goyal on Probus’ Efforts to Expand Rural Insurance and Navigate IRDAI’s New Norms

In an interview with TechGraph, Rakesh Goyal, Director of Probus, discussed how recent changes...

“I Will End the War in Gaza,” Kamala Harris to Arab American Community

In a final bid to win over Arab American voters in the closing stages...

FULL SPEECH: Cardi B Addresses Kamala Harris Rally In Wisconsin

Singer Cardi B addressed a rally in Milwaukee, Wisconsin, showing her support for presidential...
00:03:45

US President Biden Apologies To Native Indians For Horrific Boarding School Policy

During a visit to the Gila River Indian Community in Arizona, President Joe Biden...
00:00:25

Kriya: PM Netanyahu Closely Monitors ‘Military Operations’ On Iran

The Israeli Prime Minister's Office has released a new video showing Prime Minister Benjamin...
00:04:07

Protests Erupts in Valencia Over Deadly Floods in Eastern Spain

Over ten thousand people took to the streets of Valencia to protest against the...

Rethinking IT Infrastructure in the AI era

The IT infrastructure landscape is undergoing significant changes in the AI era. Adopting AI...

TechGraph Introduces New Rates for Press Releases and SEO Articles

TechGraph has announced a new pricing structure for businesses looking to publish press releases...

UN Live: Gaza’s Right To Food & Water Being Violated

United Nations (UN) representatives Michael Fakhri, Pedro Arrojo-Agudo, and Balakrishnan Rajagopal briefed the press...