financial planning mistakes to avoid

Inadequate financial management can often lead to over stepping the budgetary Laxman Rekha and inviting unnecessary debt.

Planning well ahead for significant long-term expenses is a given.

 It is substantially more rewarding and wiser to save for meeting your long-term goals (like buying a car or owning a house) than to give in to the momentary pleasures and instant gratifications,

 ending up overspending on the short-term goals.

It is always good to plan for the future. Let us learn about the most common mistakes people make regarding financial planning.

Rebalancing a diversified portfolio can increase overall returns and reduce risk.

 Rebalancing is the act of making adjustments in your investment portfolio with an aim to reassess and minimize risks. Annual rebalancing offers a disciplined investor the probability of higher long-term investment returns

. As no one can predict the market returns perfectly, rebalancing your portfolio from time to time will help you stay on track with your investment strategy.

An emergency fund of minimum 3-6 months of expenses is essential for financial wellbeing.

The best action is to create an “emergency fund” at the earliest. This fund can be invested in low-risk,

yet highly liquifiable assets such as debt funds so that you can readily and easily convert them into cash during contingencies.

Life Insurance doesn’t mean the value we get after a particular period.

 It means ensuring financial security to our loved ones, peace of mind, and happiness to self and family.

 Taking risk into consideration is essential not only to have a safe life but also to dream big.

When we start earning, we tend to postpone our dreams and plans for the future. We forget that “we are enjoying today because of our yesterday.”

 So, the best time to start your financial planning is yesterday, meaning when you are young and as soon as you start earning

. If you have missed that train, the second-best time is today, but definitely not someday!

It is a common mistake to not look beyond traditional savings tools such as bank FDs (fixed deposits) or life insurance.

In doing so, the real value of our money continues to erode over time. Explore new-age investment options that are tax-efficient and can offer inflation-adjusted returns.

 For instance, mutual fund SIPs are an excellent way to open your mind to a more efficient savings tools.

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