Do your own financial planning in 8 easy ways
There are two types of people in India – one who plans their financial life and the other who lets it flow with the flow. The number of the second group is much more and this article has been written by focusing on them. Most of the investors who do their own work can do their initial financial planning through this article.
For this you do not need to be a certified financial planner.
Financial planning can be done in these 8 easy ways –
- Build an Emergency Fund
Creating an emergency fund is a very important decision as you have no control over the future. Ideally for financial planning, 6-9 months monthly house expenses winning capital must be there in this fund.
For example, suppose your monthly household expenses are Rs 20000, then your emergency fund work-from-home should be Rs 120,000. Keep in mind that these money should be used only at emergency time like during critical illness, job loss etc. Keep this capital in an insured bank account so that it can be easily withdrawn in times of need.
- Buy term insurance (especially if you have a dependent)
The best thing about term insurance is that it is quite affordable as compared to other insurance plans. For example, if a 23 year old male wants to take an insurance cover of 675000, then he has to pay an annual premium of only 7000 rupees, which comes to only 19 rupees per day for every day. Term insurance is very important for those who are the only earning member of their family and rest of the members depend on you.
- Buy Mediclaim
Someone has rightly said that health is the real wealth. Follow a healthy lifestyle because a healthy bank account will remain only when you yourself are healthy. There are many people who spend their hard earned money only on treatment.
Make sure to do medical insurance for all the members of your family and if you are not able to insure the members now, then definitely do for those whose age is more than 30-35 years. This is a very important part of financial planning.
- Save as much as you can
Saving is very important to meet all your needs and saving is the very first step to achieve your financial goal. Most of the people are of expendable nature and for this reason they are bound to lack money at the time of need. That’s why they find it difficult to do financial planning.
Most of the people invest the little they are left after spending from their earnings. In this way, people should first separate their savings from their earnings, then spend what is left.
In simple language-
Expense = Earning – Saving
Suppose your monthly salary is Rs 30000 and you have thought of saving 30 percent. First of all, you should set aside 7000 rupees from this and stop your unnecessary expenditure, try to run monthly expenses with the remaining money.
- Invest money wisely
Choose the right investment category to invest the money, considering your risk appetite. Build a diversified portfolio to reduce risk, especially for poets who are considered to be very risky.
Investing in Shires is a good option if you are looking to invest for a long time (5-10 years). “Power of Compounding” works very well in long term investments and great scientist Albert Einstein called it the wonder of the world. If you are not able to make investments on your own, then take the help of a good financial advisor.
- Retirement Planning
By retirement planning, we mean allocating your savings for the purpose of retirement. The basic objective of retirement planning is to achieve financial independence.
Most of the people think of retirement planning only after the age of 50-55, but then it becomes a challenging topic to achieve your retirement goal. To overcome this, we need to start retirement planning early and it is better that we start investing little by little as soon as we start earning money. The advantage of this will be that we will be able to easily achieve our retirement goal with a little savings every month.
Let us understand this with an example. Suppose you are 30 years old and you are thinking of retirement in 60 years. Your monthly income is Rs 30000 and on retirement your target is to make a capital of 50 lakhs.
Suppose you are thinking of investing Rs 5000 every month and on this you are earning interest of 6.5 percent (current bank fixed deposit rate) per annum. After 30 years you will have at least 55 lakh capital. Same if you don’t invest full 5000 rupees in fixed income, out of this if you invest 2000 rupees in stock market (from which we can easily expect 12 percent every year in long term), then you will be in retirement. 1 crore can be made. You can take the help of this compounding calculator to meet your retirement goals.
- Split Your Financial Goals
Divide your financial goal into different periods such as short term, medium term and long term and invest only keeping this in mind. You try to achieve the short term goal with hard work and by this you are helping to enable your medium and long term goals as well. Keep watching it from time to time and try to solve it if you deviate from your goal. Get it
- Make a Will
Making documents is an important task for parents because if something happens to you, who will take care of your children, you can also mention it in the document. With this you can be sure that your children are well taken care of when you are not there. All these methods are very beneficial for a beginner financial planning.
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If you want that after your death there is no quarrel or problem in the family, then you must make a document for the happiness and peace of your family.
Apart from this, there are many other areas like tax planning etc. where you will need a financial expert. Keep in mind that whatever financial assistance you take, you must try to understand that the work is being done properly or only your money is being looted. To increase your financial knowledge, take the help of good books and online videos. You can also make a personal financial plan with Kredent Money