Every person have a dream of living a financially free life, where you can live a life without worrying about going to work or paying an EMI. Where you can choose and do the work of our choice and at your will, live wherever you want to, enjoy vacations at your favourite destinations and many more things like that. But, to do all these things you need to have a solid financial plan. Making a financial plan can be hard, especially if you’re not used to managing money.

A financial plan is like a map that helps you reach your financial destinations, such as buying a house, saving for retirement, or starting a business. However, there are some problems that people face while making a financial plan. Here we’ll talk about 5 common problems faced in financial planning and try to find possible solution to that problem that may be commonly relevant to you.

Lack of Knowledge

One big problem is not knowing enough or lacking knowledge about financial planning. Some people might not know how to make a budget, set financial goals, or pick the right investments. It is mostly seen that people unknowingly invest in assets that can be too risky for them without having proper research, knowledge , experience or advice, they invest their hard earned money into assets where there money is stuck and returns are also very low that dont even beat inflation.

For example, buying a money back life insurance policy for a long term, now the problem with this type of investment is the premium will be high, the returns will be low, the insurance coverage will be less, and the worst part is, in emergency you cannot stop it till the term is over and policy will be lapsed if you do so. Instead, you could have bought a simple term life insurance at a low premium and high coverage amount and rest of the money you coult invest in a mutual fund through SIP’s which you can stop anytime and also redeem your investments easily. But, you can only do this if you have proper financial knowledge.

To solve this problem, you can take a financial planning course or talk to a financial advisor who can help you. There are lot of options available nowadays to get knowledge about financial planning, don’t make any financial decision blindly as it can affect your returns and can create financial problems for you. To know more why financial education is important click here https://finstoppe.com/financial-education-and-literacy/

Unrealistic Expectations

Another major problem is having unrealistic expectations. Most people invest in some assets looking at their previous returns without doing any analysis thinking that perticular assets will repeat the same return cycle and they will make handsome returns, that can be the worst mistake of their life as it is not necessary that the asset which has given good returns can repeat the same. Investing should be done based on realistic expectation and proper asset allocation. One might think they can reach their financial goals quickly by investing in some XYZ stocks or anything, but it takes time, effort, and discipline to build wealth. To fix this, set realistic goals, create a long-term plan, and stick to it.

Delaying or Postponing

Most common mistakes people do is delaying a financial plan or postponing it. They have the habit of taking pride in delaying things, trust me it can create a massive setback if you keep delaying or postponing your financial plan. People might wait until they have more time, money, or information, but this can lead to missed opportunities and financial stress. These things can have huge impact on your potential returns and your financial goal will only move farther from you. Delaying even for a month can have impact in your goals . To solve this, start with a simple plan and take small steps towards your goals. Remember, A few years of discipline can give you many years of freedom and happiness.

Lack of Discipline

As some great people said creating a wealth is more about a persons behavior, character and discipline than just investing. Most people might have a plan but struggle to follow through. They might overspend, make impulsive purchases, or lose motivation. It’s very important to not only create a plan but also execute it. It is one of the hardest part of financial planning, one has to stay motivated, refrain from impulsive buying and overspending. One mistake can delay your financial goals by years. To fix this, you can create a budget, automate your savings, and track your spending. Also, reward yourself when you reach your goals to stay motivated. One can also read books or watch, listen to videos podcast related to financial planning, investing to stay motivated.

Making the Financial Plan Too Complicated

Mostly people struggle with this problem they unnecessary complicate things for themselves and struggle later. Which cost them huge at times, it can create confusion and does not help them in achieving their financial goals. They might use complex financial terms or invest in risky products without understanding the risks. To solve this, simplify your plan, use simple language, and invest in products that suits your goal. Don’t just invest in everything you watch or hear, it may not suit you. Stay away from investment that are catchy or that excites you. Remember investing is a boring process and very simple, invest in good companies stocks, mutual funds and don’t hesitate to seek expert advice if needed. As mentioned earlier ‘investing is more of a behaviour and less about putting money’ stay disciplined and strong and you will achieve your financial goal.

Conclusion

Finally, making a financial plan can be hard, it require a lot of hard work and research. But it’s important for achieving your financial goals. By understanding the common problems and using the solutions above, you can create a solid financial plan. and the most important part is the execution of that financial plan with proper discipline that helps you achieve your financial goals and secure your future.

Happy investing & Stay Wealthy.

FAQ’s

Q. What are the 5 biggest financial mistakes?

Ans. Here are five major financial mistakes to avoid:

1. Overspending and living beyond your means.
2. Neglecting savings and emergency funds.
3. Ignoring retirement planning.
4. Failing to diversify investments.
5. Not seeking financial knowledge and professional advice.