When it comes to financial and retirement planning, the journey is often riddled with pitfalls, mistakes, and, most importantly, precious lessons. Ananth Narayan Gopalakrishnan, a whole-time member of the Securities and Exchange Board of India (Sebi), addressing the gathering at Outlook Money’s 40After40 Retirement Expo, reveals the troubles he faced in personal finance, saying, “I have come to believe that the term retirement planning might be misleading. Let’s reframe it as financial planning, a concept applicable to everyone, regardless of age.”

Highlighting the missteps in his personal life, Gopalakrishnan admitted to making fundamental mistakes by failing to understand the importance of income, expenses, and savings early. Financial planning, he said, demands a close examination of one’s financial landscape, extending beyond the present. “While many of us know our current expenditures, the exercise of forecasting for the next five, 10, or even 50 years is often neglected,” he said.

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“It was only in my early 40s that I delved into this process, creating spreadsheets that meticulously detailed income, expenses, savings, and anticipated returns on investments. This introspective exercise proved revelatory,” Gopalakrishnan said. According to him, the essence of this theoretical exercise lies in envisioning the financial future, considering inflation, investment returns, and one-off expenditures like education and healthcare. He said, “While it may seem futile to predict what lies ahead, Dwight Eisenhower’s wisdom holds true—plans are nothing, planning is everything.”

The message is clear: don’t postpone this crucial exercise until retirement beckons. Call it financial planning and start early. “Plans will inevitably evolve, but having a framework allows you to adapt and understand the shifting dynamics of your financial journey. So, as we embark on this odyssey, let’s embrace the mantra of financial planning and navigate the complexities with foresight and resilience,” he stressed.

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Over the last 10 years, he said, Nifty gave around 13 to 14 per cent compounded annual growth. So, there is a good idea of what equity returns over a long period—higher than fixed-income assets like fixed deposits. What this doesn’t tell, he said, is the risk associated with this investment, as people often mix up risk and return in many ways.

He gave an example to explain this: “If you have invested Rs 10 lakh between January 2017 and January 2020, it would have grown to about Rs 15 lakh, roughly 14 per cent compounded annual growth. When Covid struck between January 2020 and March 2020, your Rs 15 lakh came down to Rs 9 lakh. As you can see, the Rs 15 lakh came down to Rs 9 lakh in a short period.”

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“That will give you palpitations; some of us can handle it better, but that gives you anxiety. After that, there was a fantastic run; that Rs 9 lakh today would be worth Rs 25 lakh. Overall, it’s a fantastic return, again with a 14 per cent compounded annual growth. But what that 14 per cent doesn’t tell you is all these gyrations which happened in between,” he added.