You may have often heard a lot about financial planning and probably wonder if you need financial planning advice. The answer is no – you do not necessarily need your financial advisor to guide you at every step along the way. Most of the arrangements we make for our future are by purchasing retirement plans in India.

However, to be able to plan your finances, you need to first learn how to start the process. Most of us have learnt financial planning through trial and error, but in most cases, that is not the right way to go about it. Therefore, here are six important financial planning rules that you can take a look at, especially if you are a beginner.

Tips to Plan your Finances as a Beginner

It is not necessary to be a youngster to be new to the world of finance and investments. A lot of people get busy with their jobs and financial responsibilities, only to realise that they do not have time to learn financial planning. Therefore, when it comes to these financial planning tips below, consider yourself a beginner if you need to take any of these steps to manage your money and plan your future:

• Plan Your Retirement
  
  Retirement planning is a major part of your financial planning, and it does not matter that you are young and still have years before your retirement. While plan can have an age criterion, you can start investing and saving in other avenues until then.
  
  Savings insurance plans act as very good options for retirement plans. However, in the case of ULIPs, you cannot be sure of guaranteed¹ returns, as opposed to savings insurance plans, which also offer regular income.
  
  
• Manage Your Finances
  
  You do not need a financial advisor to simply make a list of your expenses and understand if you are unnecessarily spending money at times. Getting financial planning tips from an advisor can, however, be essential when you want to take major steps in investments and savings.
  
  But during the initial phase of money management, all you need to do is understand if your expenses exceed your income and how you can keep them in check to have adequate funds for creating a savings plan or investing.
  
  
• Pay Off Loans
  
  At some point in time, taking a loan may be necessary if you want to supplement your income to meet some additional expenses, such as buying a car or a house. But note that even though you meet the eligibility criteria for more loan amount, you need not opt for the limit which is more.
  
  Try to make do with an amount that you will be able to pay back in affordable Equated Monthly Instalments that will also carry a monthly interest. This interest will increase the EMI amount and can eat into your monthly expenses if you go for more loan amount.
  
  
• Create Emergency Funds
  
  Not everyone does this until later in life when they are faced with a major emergency. But as a beginner, you can start now, even though you are not at immediate risk. Emergency funds should not be used for other purposes, least of all entertainment.
  
  This money plan is specifically for a time when there is a major health emergency or loss of income in the family for a period of 6 months to 1 year. So, there should be adequate resources in this fund, and you will need to keep adding money to it so that there is always a financial backup.
  
  
• Handle Bonus² Wisely
  
  Don’t we just love it when we get a huge performance bonus² at work, a tax* refund, or payouts from your savings plan? The natural instinct would be to spend on something lavish and buy an expensive gift. And that is completely acceptable once in a while! However, how about using this additional cash for small household expenses or making a one-time investment?
  
  By doing so, you can certainly take some load off your monthly expenditures and create a new investment fund for your future goals or retirement.
  
  
• Create Your Investment Portfolio
  
  It is never too early to start investing – in fact, when you start earning your first salary, make it a point to educate yourself about different investment options. Not all of them are market-linked or carry the same amount of risk.
  
  When you start with this first step and explore investment options, you can also create a portfolio comprising many investments – a mix of life insurance retirement plans, mutual fund SIPs, saving schemes and so on. This is important because the main thumb rule of investment is adequate diversification.

Conclusion

A lot of people tend to add a range of investment plans and savings plans to their portfolio without much thought, which can lead to various issues like non-payment of premiums, closing down investments, losing invested funds and so on. But if you are learning financial planning, even if you are late by a few years, you will still have time to salvage some losses and manage your money better.

L&C/Advt/2022/Nov/2941