## Financial Planning for WHOM? The Myths and Realities – 5

Regarding the Financial Planning, there are many myths in the minds of the common investor public. I’m trying to discuss some of these here. This is the Fifth & Final Article in this series.

Myth no. 5:-

Compounding is useless. It’s for poor or old fashioned not for us the younger generations. We can turn the things our way as & when we want to.

Reality:-

There is no substitute of compounding. Yes compounding is very dull & boring. Let’s try to understand it with this example. Just imagine if I ask you to put 1 Rs. in an square of a chess board & there after asking you to put, simply double the money in next square. Do you know what ‘ll be the result, at the end of all the 64 squares? Please look at this table to know the answer.

 Square no. Amount in Rs. Square no. Amount in Rs. 1 1 2 2 3 4 4 8 5 16 6 32 7 64 8 128 9 256 10 512 11 1024 12 2048 13 4096 14 8192 15 16384 16 32768 17 65563 18 131072 19 262144 20 524288 21 1048576 22 2097152 23 4194304 24 8388608 25 16777216 26 33554432 27 67108864 28 134217728 29 268435456 30 536870912 31 1073741824 32 2147483648 33 4294967296 34 8589934592 35 17179869184 36 34359738368 37 68719476736 38 137438953472 39 274877906944 40 549755813888 41 1099511627776 42 2199022255552 43 4398044511104 44 8796089022208 45 17592178044416 46 35184356088832

Now, I stopped here intentionally at the 46th Square. Do you know why? The reason is – the amount in 46th Square is 3518436 Crore. Why it’s important? My dear friend, do you know the size of Budget of Govt. of India in FY 2013-2014? It’s 2220619 Crore only. (source)

Now what this boring table indicates? This is the power of compounding that by the time, you reach the 46th Square, you have already surpassed the Budget amount for whole of India to be spent by Govt. of India.

You are still 18 more squares to calculate. Should I or you calculate any more? No it’s not required, I think. I hope, the very basic concept of Compounding is clear to you. If you give time, the money ‘ll grow on the basis of compounding.

OK, It’s about me. Agreed. Then what?:-

Please do not jump the gun. Take small steps, baby steps. Life is all about starting small. I know you are agree & now want to start your financial planning now. A word of caution here. “Over enthusiasm can actually do more harm than your inertia to take any action.” Let me explain a bit. Before planning anything, should you not check that there is water with you or not? Now as you have checked with yourself, that you are having the water & want to conserve it for your own betterment as well as for your family, your near & dear ones. The intention is not to make you a professional but an informed person who can make informed choices regarding his/her financial life.

This is the last article in this series. So what’s your take on this article? Can you face your own Myth for ‘Compounding is Nothing’ now? Can you now face some or all your Myths related to Financial Planning or Personal Finance?