Financial planning is an important step in your life. It helps you utilise your income wisely, plan for accomplishing future money goals and secure your financial condition for a happy retirement life. Financial planning can be a tedious task. However, you can strike the best strategies to get it right! Here is a detail that provides 7 effective financial planning tips. You can consider these tips and work on a financial plan to streamline your expenses and secure your financial future and retirement.
 

Before we get started, let us understand the importance of financial planning.
 

What Is Financial Planning?

Financial planning is a process wherein you will consider your income and regulate your expenses to manage money for accomplishing future goals to secure your life without affecting your current financial conditions. There are different types of financial planning, starting from your monthly budget to your long-term investment plan. Here are a few steps to doing the financial planning process right.
 

7 Tips For Financial Planning
 

The best way to make an effective financial plan is to get the right numbers to put it to work for your growth. Here are a few tips to explain financial planning and make it the best.
 

• Make a monthly budget - The most important and basic financial planning aspect is your strategy to manage money. And that should start with making a monthly budget. You can consider the following simple steps:
  
  
  • List your different sources of income such as salary, rental income, etc.,
  • Find the necessary expenses such as groceries, medicine, etc., and other expenditures like travel, clothing, entertainment, etc., and allocate your income based on the requirement.
  • Ensure to set aside funds for emergencies, savings and investment purposes.
  • After you have allocated the funds, monitor the spending and record it as and when it happens to avoid exceeding the budget. It will help regulate your expenses and stay within limits.
  
  
• Make a long-term financial plan - One of the significant objectives of financial planning is to accomplish your future financial goals. Therefore, finding the financial goals and calculating the funds required, considering the timelines and the related inflation rate, is important. After determining the money goals such as education, retirement, etc., and the required funds, you can make a long-term financial plan by placing your goals at different stages in your life to plan and avail of loans, save and invest to accomplish them as desired.
  
  
• Choose the right savings and investment options - To encourage financial planning in India, various financial institutions provide a range of savings and investment options. For example, you can choose to save money in fixed deposits,invest money in retirement plans, etc. It would help if you chose between the options based on your financial objectives, timelines and affordability. Then, analyze the options available and choose the most appropriate ones by evaluating the costs and benefits.
  
  
• Diversify your portfolio - One of the most important steps in financial planning is diversifying your portfolio. Based on your lifestyle and future family goals, you need to invest in different types of products to secure your investments.
  
  
• Start saving and investing early - You can reap the maximum financial benefits from savings and investment plans when you start early. The earlier you start, the longer you can accumulate and the more the returns. Also, at an early age, you will have lesser family financial commitments enabling you to invest more and get into the discipline of investing regularly. You can utilise the financial planning calculator to determine the funds required, the amount you need to invest for it annually and the investment period based on the expected rate of return from your investment.
  
  
• Secure your family - Although you make a detailed financial plan to accomplish your future money goals, you must ensure and plan for your family's financial protection. For example, if you are planning to purchase a new house by availing of a home loan, the entire burden of repaying it might go to your family in the event of your unexpected demise. Therefore, in such scenarios and otherwise, you need to consider having a life insurance plan that can help reduce the financial burden for your family in your absence.
  
  
• Retirement planning - While you plan for accomplishing different future financial goals, such as purchasing your dream house, car, your child's education, marriage, etc., you might tend to lose out on retirement planning. And start it later when you are done accomplishing your money goals. However, you may not have many options to invest for more returns at that age. Therefore, one of the most recommended financial planning advice is to start retirement planning early in life.
  
  The Government of India provides various schemes, such as the Public Provident Fund, National Pension Scheme, etc., for retirement benefits. In addition, life insurance providers offer retirement plans that provide guaranteed¹ maturity benefits, annuity plans such as immediate and deferred annuity options, etc., to help you secure your family.
  
  Furthermore, we provide retirement plans that help you customise the features to maximise the benefits to your advantage. For example, you can choose the premium payment option between the single, limited and regular payment options, the payout option between the lump sum, regular income and the combination of regular income and lump sum, etc.
  
  
• Save on taxes* - The Government of India provides various tax* deductions and exemption benefits under Section 80C and Section 10(10D) of the Income Tax Act, 1961, for many types of investments. For example, the premium you pay and the payout your nominee receives will qualify for a tax* deduction and exemption benefits. If you invest in it for a longer term, you can save a good portion of your investment on taxes*.
   

Conclusion

Financial planning is a crucial step in life that defines your well-being throughout life. Therefore, it is important that you understand financial planning meaning and its significance early in life and make a budget, long term financial plan, save and invest in different options, diversify your portfolio, concentrate towards retirement planning and save on taxes* to maximise the benefits from different products and set yourself financially independent. So, keep yourself informed, research, invest and stay focussed for a happy retirement life!

L&C/Advt/2022/Nov/3029