FINANCIAL PLANNING – THE NEW WAY TO GAIN MORE

FINANCIAL PLANNING – THE NEW WAY TO GAIN MORE

I can afford to go wrong with choosing a location for dinner with my wife. I can afford to go wrong forgetting my wedding anniversary. But I cannot afford to go wrong with my financial planning. I MAY END UP DYING POOR. Yes you heard it right.

Most of us do not do proper financial planning because we think that financial calculations are cumbersome& we can do that any time. Also we are not financially disciplined to know how to reach our goals because we consider it as wishful thinking which happens miraculously. Goals are always far & we as humans believe we have enough time to reach them. Doesn’t it happen for any work that we have to do. We do it at the last time. Our human brains can get happy with a reduced power bill (instant gratification) but we cannot ANTICIPATE the happiness of reaching a goal which is 5 years too far away.

But with the help of financial calculators used by Financial Planners (the good ones not the Insurance selling ones) you can get the cost of your future goal. This helps you to analyse how much you should saveper month to achieve your target. This  also calculates your monthly saving and investments to enable you to generate the amount which can help you reach your goal. By thorough analyses of the below mentioned points you can have a rocking financial life-

1. Have a check on your personal finances. Be determined on having a sound financial planning because where there is a will there is a way. Keep your spouse or any immediate family member informed about your investments policies, debts etc. Also do have nominee for your accounts.

2.  It is highly recommended to pay off your credit card dues on time. It saves you from paying heavy interest. Credit card borrowing is one of the most expensive borrowings you can ever have. So enjoy the rewards and benefits of using credit card but do not forget to clear your debts on payment due date.

3.  If your family is dependent on you then you need to have a term life insurance cover to provide them the financial support in case of any mis-happening. In addition to this it is also beneficial to get medical insurance for your family as it covers high rising cost of medical treatment and hospitals.

4. Try to get maximum tax saving for retirement under section 80C. Do not limit your retirement saving to EPF and PPF only. Rather go for investments which are much more then what section 80C allows.

5.  Owning a house is a major and precious dream of our life. So buy a house which you can afford and live in it. Buying a house is the most important financial decision and it depends on your financial standing.

6.  Put your half yearly expenses in money market account. Keep this money in liquid form in need of emergency so that you can withdraw it easily.

7.  Allocate your assets according to your risk appetite and investment goals. Put some part of your investment in equity through equity fund or direct equities, other part in bonds through debt fund or individual bond and remaining in gold. Keep those funds for retirement and don’t use it until the goal is at home.Use Asset Allocation Calculator to find out how you should invest to reach your goal.

8. If you are not confident about appropriate allocation of assets or don’t know how to choose the right mutual fund then don’t hesitate to take help of a financial planner. The financial expert enables you to achieve your goals.

To lead a happy and contended retired life, financial planning is a must from the beginning. Life is full of uncertainties so take into consideration the various ups and downs which you might face in future like inflation, health care cost, other expenses. Start preparing for it as early as possible because today’s savings will benefit your post retirement life. Equity is one such asset which can generate high returns on your long term investment and assures positive interest rate. So even during post retirement stage make it a part of your portfolio and escape from the risk of outliving your corpus. Post retirement your monthly income will be nil but your expenses might remain unchanged so make sure not to have any outstanding loan in your name as it will put burden on your existing finances. Planning for retirement should be your top priority so don’t use your retirement fund to fulfill other goals because you can get loan for every other goal but not for retirement.

Therefore, a well executed financial plan is like navigating through the maze if the objectives are clear. Without proper financial planning you can’t get the desired results. Thus, it is both an art and a science. Financial Planning is a continuous process so keep on reviewing and updating your plans from time to time to achieve your goals.