The key to achieving myriad money goals in your life is making a detailed financial plan at the very beginning of your career. It would help to consider the different factors surrounding your personal and family life to determine your financial plan. Different financial plans with varied features help you achieve all your future financial goals as detailed in the financial plan. The key to doing financial planning right is to follow a few simple steps. Here is a detail to help you best in this regard.
 

Before we get started, let us understand what financial planning means.

 

What is Financial Planning?
 

Financial planning refers to making a detailed plan to allocate your income for your different financial needs, such as clearing off debts, managing routine expenses, accomplishing future financial goals, planning for family commitments, etc., and achieving them as per the required timelines. In addition, it means devising strategies to manage short-term financial emergencies and do retirement planning.
 

If you haven't thought about how to start, here is a guide to financial planning for beginners.
 

How to Start Financial Planning?

Basic financial planning should start as early as you start your career. However, if you haven't started at that time, do it as early as possible to make it more effective and meaningful. These few steps detail financial planning for individuals.

 

• Make a monthly financial budget - The best way to use your income wisely is to have a monthly financial budget. To simplify, write down all the necessary monthly expenses, such as groceries, entertainment, medical, school fees, etc., and allocate specific funds. Ensure not to exceed this limit in any case.
  
  To make it easier to manage, you can maintain this budget on a mobile application and note down the changes as and when it happens. For example, suppose you have allocated ₹20,000 for your groceries every month. In that case, if you have spent ₹2000, ensure to make a note of it and try not to exceed the remaining ₹18,000 allocated going forward.
   

• Avoid unnecessary expenses - While allocating the funds for specific expenses, ensure to do it wisely and avoid unnecessary expenses. It will help you reserve a certain amount for other valuable investments in life for the future, such as  planning for retirement.
  
  
• Allocate funds for short-term emergencies - Now that you have a fair idea about the necessary financial commitments, you can allocate a specific fund as saving for short-term emergencies. It will help you manage a temporary financial crisis.
  
  
• Decide on long-term objectives - Next, consider all the different long-term financial objectives and calculate the funds required to achieve the same. For example, you can decide on purchasing a new house after ten years, planning for your child's higher education after twenty years, etc. Decide on the timelines to make it more comfortable to decide on the funds based on the inflation rate. It will help you work on the long-term financial plan.
  
  One other important consideration in individual financial management is retirement planning. It should be a major focus because your investments should be in line to help you manage your retirement needs and unexpected medical expenses to lead a peaceful retirement life.
   

• Make a detailed long-term financial plan - Now that you have realised the monthly budget and long-term investment goals, you can decide on ways to manage money in the long term. Decide how much funds will be required to achieve the long-term financial goals, and determine the amount you need to start saving today. Then, revise your monthly budget and find ways to make a specific fund for your personal investment portfolio.
  
  
• Make a diversified portfolio for investments - After understanding and evaluating the funds required for the long term, you can plan your investment portfolio. If you have started investing early in life, you can take up risks and ensure apt returns in the long term. On the other hand, you can also opt for conservative debt funds to secure your investments if you have increasing family commitments.
  
  While deciding on a personal investment portfolio, you should also ensure life coverage. It will help your dependent family survive and reduce their financial burden in your absence. Life insurance providers offer comprehensive solutions such as the ULIP that help ensure life insurance and create wealth.
  
  One portion of your premium will go for the life cover, and the remaining will be invested in the financial securities market. You will get the returns as a maturity benefit at the end of the policy term. You can choose the funds to invest in based on your risk profile and the option to switch between them based on the market conditions during the policy tenure. For example, when you invest in Tata AIA Life insurance, we offer 11 different fund options.
  
  Choose products that help you save on taxes* to add to the financial tips. For example, when you invest in life insurance plans, the premium and the payout will qualify for a tax* deduction and exemption under Section 80C and Section 10(10D) of the Income Tax Act, 1961.

 

Conclusion

  
Financial planning in India is increasing, considering the pandemic and unexpected economic downturns. When your income can satisfactorily achieve your short-term and long-term financial goals, you are always on the right track! A well-devised financial plan can help you achieve the same during the long term if you have made the right investment choices. Therefore, analyse your income, decide on your financial goals and timelines, make your investment choices wisely and stay invested to maximise the returns!

L&C/Advt/2022/Oct/2459