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Wealth accumulation and retirement savings go hand-in-hand. Expert advice

We all need money to live. We also need money to retire. A seasoned expert breaks down why we need to think about financial planning more carefully, and how…

Financial Planning Specialist

To address all the stages of the life cycle and your aspirations, be it establishing a home, raising a family, educating your children, fulfilling your business ambitions, or planning your retirement, it is imperative to have a robust financial plan in place, before it is too late. As they say, people do not plan to fail, but they fail to plan.

Do you know how much a person will almost earn during one’s working life if they start working at the age of 20 with an income of USD 10,000 per annum and an increment of 10% per annum until they retire at 65 years of age? Astonishingly, they would have earned almost USD 8 million during their entire working life. Off their total earnings, how much do you think they end up saving in the long term? Taking a count of 100 people, only 10 people make it to the top 10 when they retire. Off these 10 people, only 1 will be wealthy, 4 will be comfortable while 5 will be self-supporting. Off the remaining 90 people, 26 would have died before they retire while 64 will be dependent on their family, friends, relatives, and charity. Any idea what distinguishes those 10 people from others? It is their commitment to long-term planning.

Here’s the rub

The majority saves for the short-term as they cater mostly to short-term needs. These are the people who save to spend, perhaps to go on a holiday, buy furniture, a new or second car, etc. and this indeed is a difficult habit to break with no thought given to long-term savings.

The ones who make it to the top 10 as wealthy, comfortable and self-supporting are the ones who ensured their earnings provide them for financial independence in the long term. We all need to plan for a secure future while coping with the unexpected. The aim of financial independence should be to cater to and have short, medium, and long-term plans.

Usually, when a person starts earning, their commitments and responsibilities are less than their income. Their income is high while their obligations are low. With time, the gap between the high income and low commitments shortens to a situation where the obligations are higher than the income. Such a situation arises when parents start aging, siblings might need financial support, get married, have children, etc. This is the time when you look for other avenues to fulfill these responsibilities. Again, after a certain period, these responsibilities lessen and the income is higher than the obligations. This usually happens at a time when one nears retirement. After retirement, the income you are earning through employment or business stops with no compromise on lifestyle. Further, while income earning capacity stops you are more prone to diseases which causes an addition to your monthly expenses and in case of a major illness, the expenditure can be very high. Greater responsibilities lead to increased financial commitments and just one upheaval can mean a disaster for the entire family.

Taking a count of 100 people, only 10 people make it to the top 10 when they retire. Off these 10 people, only 1 will be wealthy, 4 will be comfortable while 5 will be self-supporting

Consistency counts

The future belongs to those who dream for it and work towards achieving it. It is vital to know your future plans and review them periodically. You should agree your aims, set priorities, and design a plan to achieve them at different time slots like the next 10 / 20 years and so on. A contribution mode based on your plan needs to be chosen to set aside funds for your future needs. It can be monthly, quarterly, half-yearly or yearly mode. Regular savings for the future with personal financial protection is an absolute necessity.

One should not ignore the fact that life is uncertain. You never know what is going to happen the next minute. Accidents happen, so do market crashes, illnesses, and death. Therefore, a sound financial planning guarantees that even in case of any unforeseen mishap, the right amount of money is available in the right hands at the right time. It ensures the lifestyle you have provided for your family is not compromised and your plans for your loved ones are taken care of in case you are no longer there. Proper financial planning also ensures you are covered adequately in case of any permanent of partial disability which hampers you from continuing your occupation and earn a livelihood for your family. It also provides adequate cover in case of a critical illness so that the post-hospitalization expenses are taken care off and in case you are unable to work, there is no financial distress and burden on your family. Having ample financial cover against disability, disease and death is crucial. The amount of cover needed to meet the family’s monthly expenditure and future requirements should also add all the outstanding loans and liabilities so there is no additional burden of the family members. The plan should be designed to provide enough money for the family to be financially independent.

The solution you opt for should give easy access to your investments and ensure money is easily and readily available when and where you need it to meet your needs

Be a vigilante

Be it living too short or living too long, doing financial planning is crucial. You need to choose an entity that is registered, licensed, and regulated with protection of your capital, offering you complete peace of mind. Do check the financial strength of the company with assets under management, reviews and feedback of clients and the financial expertise it offers through their well-trained staff. It is also important to check if it offers customized solutions with flexibilities and a range of benefits to cater to your requirements. The solution you opt for should give easy access to your investments and ensure money is easily and readily available when and where you need it to meet your needs.

Designing a sound financial plan is complex. It is not as simple as it seems. It is important you talk to the right advisor, a professional, who is qualified and keeps your information confidential, has the latest market information and can provide comprehensive technical support and offers you free service with timely reviews.

The author is a seasoned financial services professional with Continental International Group offering bespoke solutions to suit your requirements.

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