World Financial Planning Day: Money mistakes that can derail your financial future

On World Financial Planning Day, held annually to raise awareness about the importance of financial literacy, it’s essential to reflect on common mistakes individuals make while planning their finances.

Effective financial planning isn’t just about saving — it’s about smart strategies that align with personal goals and financial realities.

As revealed in FPSB India’s latest survey, part of the Mapping India’s Financial Path report, a growing number of Indians are turning to professional financial planners to navigate today’s complex financial landscape. The survey shows that over 86% of respondents believe there are expanding entrepreneurial opportunities in financial planning, while 14% see flourishing global job markets for those skilled in the field.

The report stresses a rising awareness of the importance of financial planning, but also highlights several common mistakes people make that hinder their financial progress.

To avoid these pitfalls, it is crucial to avoid these mistakes:

Lack of budgeting

Narender Singh, Smallcase Manager and Founder of Growth Investing, emphasises the role of budgeting in financial success.

“Spending tends to rise with income, but without a structured budget, it’s easy to lose track of where your money is going,” Singh explains.

Whether you create a simple monthly or quarterly plan, budgeting is essential to ensure expenses are managed, and savings are maximised.

Singh advises starting small — track your spending for a month, identify areas where you can cut back, and adjust accordingly.

Emotional spending

A significant pitfall many individuals face is emotional spending. Whether driven by excitement, impulse, or fear, emotional decisions can derail long-term financial goals.

Singh notes, “Before making a purchase, take a moment to reflect on whether it’s necessary and aligns with your financial plan. Sticking to the plan rather than acting impulsively can save you from financial stress.”

Skipping financial goals

Setting clear, actionable financial goals is a critical step, often overlooked.

Whether it’s saving for a vacation, a new home, or retirement, having specific financial objectives gives you direction and motivation.

Singh points out, “Without defined goals, saving lacks purpose, and financial discipline becomes harder to maintain.”

Harsh Gahlaut, Co-founder and CEO of FinEdge, echoes this sentiment: “Investing can be easy, but wealth creation isn’t! True long-term wealth creation is an outcome of a robust financial plan and process that considers all variables for successful investing. Don’t underestimate the power of a customized financial plan—because a goal without a plan is just a wish!”

He emphasises that a financial plan not only defines your goals but also gives your money purpose, turning aspirations into achievable objectives.

“For an important objective of being financially free in life, do not be penny wise and pound foolish. The importance of taking informed risk is essential to achieving your long-term financial goals, and the best way to do that is to have a trusted investment expert guide you through your investment journey,” he said.

Underestimating debt

Managing debt effectively is another key component of sound financial planning.

Singh warns, “Underestimating your debt can trap you in a cycle of financial stress. It’s crucial to monitor your debts and develop a repayment strategy to ensure you’re not overwhelmed by interest payments.”

Inflation and savings growth

Another commonly overlooked aspect is inflation’s impact on savings.

Singh highlights, “If your savings are simply sitting in a bank account without growing, inflation will erode their value over time.”

To preserve wealth, it’s important to invest in avenues that outpace inflation and ensure your money is working for you.