A misconception that people have about investment planning is that they are meant specifically for adults, i.e., professionals, both experienced and freshers.But that could not be farther than the truth. In fact, financial planningas a tool is open to people of all ages. In fact, it is better if a young adult who is still a student were to be introduced to financial planning. That’s because, a recent survey showed that the majority of Indians have not preparedfinancial plans and, only 49% have one in place. This data from the survey shows the need for financial planning.A financial plan ensures that you have a safe and secure future in a world where inflation seems tobe ever-increasing.Additionally, Other data also shows that nearlyonly 24% of Indians are financially literate. Thus, it is also important to minimise this wide gap between financial literacy and financial planning. Filling this gapwill provide Indians with the expertise of investing to secure their future. Also, it is also important to learn whatfinancial planning and financial literacyare and then learn how they are interrelated.
What are financial planning and financial literacy?
Financial planning involves the act of determining how much of your income should be allocated to investment plans and how much should be kept aside for day-to-day expenditures. Strategising expenditures will help you to achieve your financial goals. Conversely, financial literacy is defined as the ability to apply the investor’s knowledge and skills to accurately manage financial resources for long-term financial well-being. Financial literacy is the process through which you cangain a better awareness of your financial status and learn how to improve it gradually by inculcating financial habits such as saving, budgeting, planning, and then taking the best financial decisions possible.Butas stated earlier, a lot of people don’t have a fundamental idea of personal finance. The lack of skill to comprehend it is the problem, not theavailability of information.
Numerous people in India seem to be uninformedabout the future financial load they will face as a result of borrowing loans with exorbitant interest rates. It is a reason to be concerned when a substantial portion of Indians lacks financial awareness which results in things like a large portion of the population beingill-prepared for retirement and high rates of consumer bankruptcy. To eliminatethe issues caused by poor financial planning, people of all age groups must beawareof the pros and cons of financial planning and the right ways of doing so. Thus, it is better for people regardless ofage including students to learn about financial planning.
Tips for students to become financially independent:
- Study and research all about investments:
While it may seem intimidating when you are new to the world of investing and have no idea where to start, the first thing you need to do is carry out research on the various forms of investing such as passive and active investments. Then, determine which mode of investment such as lump-sum and SIP suits your financial requirements. But,please remember to read about investment only from verified sources and financial experts who have years of experience in the investment space. While you may find innumerable answers on the internet to your investment-related queries, it is necessary that you only visit verified websites while seeking information.
- Contact an expert:
Ifit ever happens that you are having specific queries and want help which is personal, you can opt to book a personal one-on-one session with a financial expert. In the session, you canavail a detailed personalised financial plan. This session mayalso help you in creating an investment plan that has been evaluated by an expert and thereby, will minimise the chances of making incorrect investments that will result in poor returns.
- Start investing:
While gaining knowledge of investment strategies is one thing, applying the knowledgeis a different thingaltogether. Hence, it is necessarythat you take the first step by investing in assets where you see growth and security. While it is true thatin the world of investing, high risks lead to better returns, you must be very careful whiletaking such decisions. With one wrong investment choice,you can also end up incurring major losses. Thus, it is important to remember that while investment is necessary, it is prudent to invest wisely.
Even though financial planning may sound like a heavy term at first, with time you can master the art of planning and save enough to have a comfortable post-retirement life.