Many individuals start planning only when they reach their 40’s, as it finally dawns on them that they are not too far from retiring. At this stage, since they have little time to create a corpus that should take care of them for at least 2 decades of retirement plus their kid’s education, etc. and therefore they need to make big investments regularly. This is usually difficult, due to the financial responsibilities people generally have in their 40s, like paying off a home loan, current education expenses, etc.

Remember, the earlier you start planning, the more time you give to your investments to grow. Consequentially, the more corpus you would be able to accumulate.

Most of the time we calculate our money targets on the basis of current prices and income. Inflation gradually increases the cost of living, as it reduces the value of your money over the years.

You earn, today your salary, let’s say rises in line with inflation or more than that. Your income can take care of your day to day spending, but for your goals like child’s higher education, marriage, retirement, etc. you need to plan, save and invest today to have a tension-free future.

One of the biggest Mistake In budgeting is expenses estimation. Without making detailed financial plans sometimes you estimate lower budgeting and sometimes higher budgeting. Analyzing expenses is the core of budgeting. Differentiate between monthly expenses, yearly expenses, and lumpsum expenses are important.

Mis-selling means that you were given unsuitable advice, the risks were not explained to you, or not given the information to you which needed and ended up with a product that isn’t right for you.

Mis-selling is a significant problem in the financial services industry. Brokers, financial advisors, bank representatives, or other salespeople of financial products who are compensated based on commissions. Usually, they sell investment products based on how much they can earn rather than what is suitable or what is needed by investors.

In the Indian financial market for investment decisions, investors mostly dependent on financial agents and companies. From the last many years some of the agents and so-called “Financial Advisors” are using fancy words and tactics to investors and sell them inappropriate products like insurance policies, high-risk mutual funds, and bonds, etc.

The cost of mis-selling financial products affects the investor’s portfolio security, returns, and risk management. (Investors lost 1.5 trillion due to mis-selling – source livemint)

Many times we have seen brokers, financial advisors, bank representatives, have their own interest and biases in business and high commission products.

High commission-based investment products increase the expenses of the portfolio and that affects portfolio returns. Examples like high commission fixed deposits, regular mutual funds, insurance policies, etc. In regular mutual funds alone, 8500 Crores of investor wealth was consumed by financial middlemen. The commission percentages for other products like insurance policies and ULIPS are indeed much higher.

Regular Mutual Funds – Regular mutual funds are those mutual funds that are Invest through a mutual fund agent, brokers, distributors, or advisors. Regular mutual funds include commission on a recurring basis. Due to high commission expenses, returns are comparatively lower in the case of direct mutual plans.

Direct Mutual Funds – In Direct mutual funds, agents, brokers, or other intermediaries have no role. Investors are free from commission or distribution fees, which bring down the expenses and give higher returns than the regular mutual funds.

Medical Expenses tend to gradually increase as a person grows old. With the ever-increasing medical costs, it becomes vital to ensure that you have enough health cover or health corpus that can take care of various unexpected medical expenses from time to time.

Medical Inflation in India is likely to rise at double the Inflation rate. A report by Mercer Marsh Benefits said forecasted medical inflation rate will be 10% in India, while actual inflation will be at 5%, elsewhere.

There is a dependent within the family (non-working spouse, elderly dependent parents, or a child), the individual must ensure that he has adequate Life Insurance.

One should buy a term insurance policy to meet his life insurance needs and avoid insurance-cum-investment products like ULIP’s, Endowment plans, etc. where, despite paying a high premium every year, the life cover may not be adequate.

Formation of a financial plan isn’t of any use if we don’t implement and review it properly. We should not take it as an onetime activity as it requires periodic reviews. Since financial plans are long-term plans, sticking to one single strategy would result in a faltered output.

Any event in life which affects your finances and savings pattern will require an alteration in your investment strategy. Make sure you re-examine your plan periodically so that the market changes, your lifestyle changes, etc. are also taken into account.

Investors often do not think about tax consequences when making investment decisions. Due to the lack of tax planning, it highly impacts on Income and Portfolio Returns.

Having a Will gives you the comfort of knowing that the rewards of your life’s work will be distributed and managed according to your wishes. In India, it is generally noticed that people refrain from creating a will and usually tend to leave the future to fate.