A tiny questionnaire. What comes to your mind when I say “Finance” or “Financial Planning”? Tall banks and people with books, calculators and spectacles wearing spectacles and coats?
Our executive financial adviser, Salim (name changed to protect privacy) tells us that he has encountered several people with so many misconceptions about financial planning. He would like to share some of those misconceptions and myths along with the reality.
So Salim, could you take over now?
Hello everyone! Salim here! I have encountered many people who misconceived finance and trusted what were, in reality, myths! Hence, I decided to bust a few myths.
Here are some common myths misinformed people believe.
1. “I’m Immortal and will earn forever”
This breed of people is well known by everyone unless you aren’t living under a rock! The “Forever young” breed of people always walks around faking their age and pretending to be young and flawless. Many people believe that they will always have income so they need not bother about finance or financial planning. There is limited time to fulfill all financial goals.
2. “I won’t understand all the lingo and acronyms in personal finance”
A tiny chunk of people actually understand all the lingo and acronyms of personal finance so it’s not necessary for you to understand everything except some really basic terms. Grasp the fundamentals of personal finance, budget properly, insure yourself and loved ones, invest properly and pay all premiums on time. Also clear all your debt. Is this rocket science??
3. “I am not as rich and intelligent”
You don’t have to be born with a silver spoon or be someone like Srinivasa Ramanujan for being good at personal finance. There are so many online calculators for you to calculate interest, etc. Regardless of your wealth, you should do personal finance planning. Manage your individual situation, actions and attitude in a manner that’s best for you for the present and future.
4. “Having multiple credit cards will create wealth problems”
If you’re paying your balances off in full every month, you don’t need to worry about having multiple credit cards. In fact if you have a single credit card, that can damage your credit score, thanks to your credit utilization ratio (how much of your available credit you’re actually using)
5. “X manages my money, so I need not worry”
None of us should leave any important aspect of our life entirely in the hands of someone else. That’s called dependency. When you are physically and mentally sound, earning good income, why should you depend on someone else to take care of your money?
6. “Why create a will when I ain’t rich?”
Creating a will or a trust has little to do with your financial status. You create a will to divide your assets between people of your choice after your death. Your house, car, investments, insurance, land, property, etc. are all included here. If you don’t have a will, the court will decide what to do with your assets according to the law of the land.