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Senior Citizen Financial planning: If you are thinking along the lines of ‘If I had a crore, all the needs of my life would be fulfilled’, you haven’t quite thought everything through. That amount may not mean anything in the future. You have to understand the fact that inflation is a real thing. Even if it is very gradual, there is a constant increase in the value of currency and the amount of money needed for purchases. A lot of people assume spending 1 crore today will be enough to sustain them for the rest of their life, which is a very misguided notion.
Take a good look at the fundamentals of the world, then reshape your thought process. You actually have to attempt understanding how much it is worth in the future, so that where you want to ‘invest or spend’, your thought is justified. Only then, can proper deduction be made on how to save and invest to achieve your goal.
Rule of 70
The Rule of 70 works great for estimating the growth of money. All you have to do is see what the current year’s inflation rate is. If you divide 70 by the current year’s inflation rate for the future you expect, you get how much time it would take for your money to be halved. For instance, the 7% inflation then 70/7=10 years. Hence, in a decade, your 1 crore will only equate to 50 lakhs in value.
Why is correct financial planning necessary
We tend to underestimate the importance of inflation, thus overestimate the underlying value of fixed savings. Fixed savings need to be tailored along with forward looking estimations as value diminishes over time. Simple algorithms like Rule of 70 enable to incur the required changes to bring balance thus enabling sensible long term budgeting. That will enable you sculpt the blueprint of how much realistic funding will actually be required in the long run.
Formulate the right strategies
In order to avoid financial problems during retirement, it is crucial to start making investments early on in life. Make sure you evaluate your financial goals on a regular basis. Adapt your policies based on current inflation and other economic indicators. Always remember that while the value of a rupee depreciates with time, it is still possible to cater to your future necessities with effective and precise planning.
Effective Planning
Start saving and investing at an early age to avoid financial difficulties during retirement. Set aside at least 20% of your income every month into your retirement funds. Ensure the utilization of SIP, PPF, and mutual funds for retirement planning. Set fund limits factoring in the inflation rate. Make long term plans based on the Rule of 70 and the decreasing value of money.
Smart Planning is Key to achieving desired financial results. Start saving and investing at an early age to avoid financial difficulties during retirement. Ensure the utilization of SIP, PPF, and mutual funds for retirement planning.
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