TLDR: You might have genuine reasons for postponing financial planning. Some of your reasons are made up. But you have to start somewhere, so start sooner to make the most of the opportunities it presents.
Money is a tricky subject to navigate. No one wants to talk about how you earn it and, more importantly, how you spend it. Statistics on financial literacy show that many Americans are not financially literate, with over 53% of adults saying thinking about their financial situation makes them anxious and 44% saying discussing their finances is stressful.
I do not like Nike. But I do like their logo. Just do it. It packs a powerful message, especially on a topic that scares most of us. We have to talk about our finance sometime, and the sooner you do it, the better.
As evidenced by survey results, the apprehensions are real. This subject forces you to have that difficult conversation with yourself. Did I really need that in my closet? I eat out a lot but it’s okay, I have money left at the end of the month. I plan on playing the game next month and it was on sale.
And who do you ask for help? My friends are more careless with money than I am. I can’t ask dad, he will think I am asking for a handout. My brother is doing so well in life, why would he share his secrets with me? They think I am dumb and cannot even manage my own finances.
I do not know about you but I have had these conversations with myself. Questions and answers like these creep up in your mind all the time. But this is just the tip of the iceberg, it highlights deeper issues that we have.
These range from our fears about what we have and couldn’t get. It is about failure. It is giving someone control of your money. And all of this has been made worse by the declining market conditions.
So, the easy answer is to procrastinate and shove ourselves into a different world. Binging on Youtube and Instagram does not help out cause either.
24 Financial Planning Fear and why you should reject them
If the above does not resonate with you. The following will surely:
- I do not have knowledge or understanding of financial planning. How will I make the right decisions? The answer to this is simple, just like in life, all of your decisions will not be perfect but you have to start somewhere, so start now.
- There is too much information to process or understand. As any experienced programmer will tell you, its daunting at first but when you keep at it, you get good. The same principle applies here.
- I know it’s important but I do not have time right now. Procrastination. This is the bane of our existence. As we learn with every move that we are late to, I should have done this earlier, it is the same case for financial planning.
- I have immediate needs to cater to, my long-term financial planning can take a back seat for now. This is procrastination with a different face. You are just not dealing with the issue.
- I have money now and I have money later. This is the classical example of a short-term mindset.
- Stingy people manage their finances and I am not one of those people. This is not true. You need to know where the money is going with your current lifestyle. If there are changes that you need to make, good, if not, carry on.
- I do not have discipline and self-control. This is good that you know about yourself. How about diving deeper and what exactly you do not have control over? This is a conversation you have to have yourself later in financial planning. There are ways to tackle this, so do not fret about it now.
- I already make so less, how will I find room to invest? You cannot invest $1000, how about $100? Leave that, how about $10? It all compounds over time and the earlier you get this in your mind.
- I will have to take difficult decisions related to my finances. You won’t if you never try. In most cases, you realize it was not a big thing. In some cases, it will highlight some glaring issues and you will be able to correct your course.
- I have a busy lifestyle and lack the time to do it. I cannot keep a record of everything I spend money on. This is a genuine concern for many people. You do not have to be exact, approximations work. You just need about your income and expenditures to get started with a financial plan.
- Complacency or feeling like there’s no urgency to plan finances. Or you have a general disinterest. Comfort is the death of progress, especially when it comes to money matters. And you need to be accountable for your finances, after all, it’s your reward in exchange for the hours you put in at work.
- Fear of failure or making mistakes with finances. This is more real than you imagine as you will make mistakes. This is why make them early so you know the field better. Moreover, this is why you should make yourself more knowledgeable in the field.
- I trust others to manage my finances. Your spouse or financial advisor might be taking care of your finances. But how do you know if they are making the right decisions if you are not in the know-how? The simplest answer is the one I gave above and it is to inform yourself about the domain to make others more accountable.
- I have poor credit history and it will not help me. On the contrary, this will help you a lot. You will be able to change your situation easier than you think and it will lead to a better future, where your credit history does not close doors for you but open them.
- The future will sort out itself. If only it would. It would be a perfect world then. Bad things happen to good people. Nothing personal in that. It’s just the circumstances. Better to be prepared than not.
- I do not want to change. You shouldn’t. You are just taking note of what you have and what you do with it. This is all that it boils down to.
- But financial planning is only for the wealthy. It is for everyone. The needs and wants are different for different people and there are different plans for different people.
- Not knowing where to start with financial planning. This is where this blog and others come to your aid. Or read a book on financial planning. All roads lead to the same destination, you have to find the one that is easy for you.
- Lack of trust in the financial system or markets. They are inherently profit-making enterprises and serve their interests. But they cannot continue if they do not fulfil the needs of their customers. The business case will cease to exist. And if you are diligent in your research, you won’t be easily manipulated.
- Financial planning services come at a high cost. They can be but not all shoes fit the same size. You have to pick and chose. And no one is stopping you from managing it all on your own.
- I am reluctant to share personal financial information. Don’t share it then. Do it all on your own. But if you do not get a separate set of eyes, you cannot know what is going wrong. There are forums and subreddits to help you out. So, don’t divulge the details and get the information you need to get going.
- I am too young to think about financial planning. You cannot be more wrong about it. The earlier you start, the earlier you make mistakes, the earlier you learn the ins and outs, and the earlier you start reaping in the rewards. It is not only relevant to later in life but right now so that you make more prudent financial decisions.
- It is too late for me. If you do not start then it will be too late. But if you do, you will reap the benefits. If you are not taking advantage of its benefits, then you are on the losing end but if you do, you be better off with an action plan.
- I have it under control. Are you well aware of all tax implications of your financial decisions? Are your major life events, such as marriage, children’s education, or retirement in check? If yes, then you probably do not need financial planning, you have it all under control. But if you have not, like most of the people, then you need to start educating yourself.
The above is not an exhaustive list but it should give you an idea. It should also have clarified some of your notions about financial planning. It is not very complex and can be explained with relative ease.
- Assessment of current financial situation: This involves analyzing current income, expenses, debts, assets, and liabilities to get a clear picture of the individual’s financial standing.
- Setting financial goals: This involves identifying both short-term and long-term financial objectives, such as saving for retirement, paying off debt, or buying a home.
- Developing a budget: This involves creating a spending plan that aligns with the individual’s financial goals and helps to prioritize spending and saving.
- Creating an investment strategy: This involves developing a plan for investing money in a manner that aligns with the individual’s goals, risk tolerance, and time horizon.
- Managing debt: This involves developing a strategy for paying off debts, such as credit card balances or student loans, in a manner that helps to achieve financial goals.
- Protecting assets: This involves developing a plan for protecting the individual’s assets through insurance, such as life, health, and property insurance.
- Retirement planning: This involves developing a plan for ensuring a comfortable retirement, including calculating retirement income needs, developing a savings plan, and considering Social Security and pension benefits.
- Estate planning: This involves developing a plan for managing assets and ensuring that they are passed on to beneficiaries in a manner that aligns with the individual’s wishes.
- Tax planning: This involves developing a plan for minimizing tax liabilities and maximizing tax benefits, such as through tax-efficient investment strategies and deductions.
- Regular review and updating: A financial plan is not a one-time process, but rather a living document that needs to be regularly reviewed and updated to reflect changes in the individual’s financial situation, goals, and market conditions.
Conclusion
It is easy to get bogged down with financial planning. It is a daunting task. Especially when you think about your future. You might not be where you wanted to be in life. This is okay. You can get there later.
Let me help you with this. It is easy. I struggled with taking a decision until I was 35 and I had been thinking about doing it since I was 22. And when I took my first step, I regretted the wasted time and idle conversations that did not help my cause.