Sunday, July 23, 2017

Importance of Financial Planning at the Age of 25

money planning effects
It’s not easy being 25 – most people are just making the transition to adulthood, settling into their job and trying to propel their dream careers while still having to pay bills. It’s a time of great uncertainty & financial planning is not priority for many. All things in life require planning. A financial plan is just a step by step approach to meet all of your life’s goals taking several factors such as risk appetite and inflation into account.

It is only in their thirties that most people begin actively investing with clear financial goals. Very few start investing is stock market at this age.However, this is an opportunity lost – a costly one too as it is the power of compounding that kicks in with investing as early as 25, if not earlier. The longer your investment term, the more likely you are to reach your financial goal in time. With the power of compounding, not only does the corpus you invest initially give you returns, but the returns you earn are re-invested back into your corpus thereby giving you greater returns in the long term.

It is theoretically possible to build a far bigger corpus if you start financial planning at the age of 25, by setting aside a much smaller portion of your salary & a much lower risk profile. Even if you are not a savvy investor by 25, the importance of financial planning should not be lost on you. In fact, the more you take interest in financial planning, the better you get at it with age.

While preparing a financial plan, you should seek help from a professional financial advisor who can assess your risk appetite and accordingly decide your asset allocation. A good financial advisor will be responsible for the execution and periodic monitoring of the plan so you can focus on taking care of your family and meeting your personal & professional goals. Hence, it is important to understand the importance of a financial plan.

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