“A stitch in time saves nine” reminds us of how the timely action in any matter saves one from worry, loss, and hardship.
24 hours in a day, 7 days in a week and 365 days in a year. This is the time we all get, nothing more nothing less. Within this time span, if one puts in place a well thought out financial plan, it is highly likely that not only would you have less worry about your finances after your retirement but also throughout your working years. The more time one has on their side, the better it is for the person to reach his/he financial goals.
The difference between Saving & Investing
As kids, we were taught to keep aside at least 40% of our earnings into savings. Whatever we earned had to be put in a special savings account for the future. This money would remain idle and would only earn interest from banks.However, the need of the hour is not just saving. You need to invest the savings at the right time so that you get a higher rate of return that will help you reach your #LifeGoal.
When Amit was born, his father decided that he would save INR 100 every day, till Amit was thirty. His aim was that when Amit is old enough to handle his finances, he could have some savings from which Amit could build his own life. So at the age of thirty, Amit received a valuable gift from his father of approx. INR 11 lakhs. That’s the power of saving. Before you know, it will become a habit and you can stash away the funds safely.
Now, if he had managed to invest INR 100 every single day in an avenue that pays 10% return/year, Amit would have earned a nearly 6-fold sum of INR 63 lakhs. Now that is the magic of compounding one can avail while investing.
Delay can cost your goal
We usually define ‘risk’ as a monetary loss. But in reality, a risk is the inability to reach your pre-defined goal. For some, the cost of missing that goal means a delay in child’s education, while for the other; the real risk is not having money post-retirement!
A mere gap of a few years can greatly reduce your final corpus even if you save and invest regularly. For example, a person who invests INR 5,000 per month for 35 years in an avenue that gives 15% return annually can get INR 7.4 crore. If the same person starts this journey 10 years later, he/she will get a corpus of INR 1.6 crore only — which is roughly one-fourth of 7.4 crores). This is the true cost of delaying investment.
Even the most financially-aware individual often thinks that they have enough time to reach a goal. In reality, nothing is constant. Unforeseen events such as a fatal accident, critical illness, partial or total disability can completely ruin your plan. Hence one should have an emergency corpus ready to turn to, in times of need. This would ensure you do not hit sudden speed-breakers on the path of achieving your life goals, due to lack of financial aid.
Hence investing in ULIPS are ideal, to tap both insurance coverage and market returns. Be sure to adopt the right financial system that includes risk profiling, proper asset allocation & regular wealth tracking to weed out non- performing investments. If you have decided on your goal, then start investing now. If an apple a day can keep the doctor away then a timely investment will definitely keep financial loss at bay!