Need financial planning?

Author: P V Subramanyam

There are many reasons why you need to plan. Let us enumerate some of them:

1. To protect you and your family against financial risks – Financial risks include early death, critical illness, accidents reducing your ability to earn, living too long, etc.

2. To reduce or eliminate personal debt – Too many people spend with money that they are yet to earn! This will ensure an unnaturally high pressure on their future cash flows. So learn to pare the debt that you have. One major worry about debt is the high cost at which it is made available to you. In case you take a loan from a bank on your credit card, you will end up paying more than 40% as interest. You get the hang of what I am saying…!

3. You will live too long – Much longer than you think you will! The associated costs of living will have to be taken care of. If you are a gymnast you would have retired at 15 years, a tennis player at 32, a cricketer at 35, or just an ordinary employee in a 9 to 5 job then at 58 years. Now if you live up till the age of 90 – or your spouse (who is 5 years younger to you) lives up till the age of 90 (i.e. your age of 95 years), have you estimated how much money you will need.