Here are 5 common myths and how to deal with it:
MYTH 1: FINANCIAL PLANNING IS NOT FOR ME
Reality: Whether you have a lot of money or very little money, you need to manage your finances. Financial planning allows you to systematically meet your financial goals. You need to give time for your investment to grow. Say you want to learn swimming. You will pay for swimming instructor, buy a swim suit and spend time practicing in the swimming pool. Similarly, you need to spend time understanding money management and financial planning.
MYTH 2: SAVE TAX THROUGH INSURANCE POLICY
Reality: Every year, most salaried individuals do their tax planning towards the end of the year when they have to save tax and show the poofs of their tax-saving investments to their employer. Most individuals end up putting money in life insurance products. This is the worst way to save tax. In fact, you are getting trapped into a product that you may actually not require. You should first evaluate you financial plan and use tax savings instruments to work for your finance.
MYTH 3: INVESTING IN EQUITY IS RISKY
Reality: Are you one of those who gravitate to guaranteed products? Fixed income products such as fixed deposit assure you of guaranteed returns. However, at times, fixed income products, after factoring in inflation and tax, give negative returns. Equity, on the other hand, has the ability to give you higher returns but not guaranteed returns than the fixed income product. However, it comes with risk. You can look at taking calculated risk. You don’t have to put all eggs in one basket. Instead look at diversifying and don’t invest based on stock tips blindly.
MYTH 4: TERM INSURANCE IS WASTE OF MONEY
Reality: Firstly, you need to understand that life insurance is for your dependents and not for you. Life insurance is basically to ensure that your dependents get the money when you die. They will have sufficient money to survive in your absence only if you take adequate cover. You get higher sum assured in term plans by paying a small premium. When you opt for an insurance plus investment product, you end up paying higher premium for a lower sum assured and the return on the product is also small.
MYTH 5: A FINANCIAL PLANNER IS NOT REQUIRED
Reality: Many are scared about numbers and money talk. Then there are those who think they know all about finances. However, when it comes to money, you may need a professional to handle your finances. You may not be able to keep a tab on all events that happen around you and impact your money. A financial planner will be able to help you navigate through different financial products and help you take an informed decision.