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3 Financial Planning Tips for Salaried Employees: The Detailed Guide

Financial planning is a core keyword to life's success. And, it is very important for salaried employees. The hard-earned money should be used for the right purposes, saved for the necessary obligations and secured for retirement. But, when you have a large chunk of money stepping into your life, how do you go about handling it? Here are a few financial planning tips to help you in this regard!
 

Financial Planning for Salaried Employees


The financial plan for every individual will depend on their lifestyle and family obligations.




  • Prepare a monthly budget - A monthly budget is one of the best and primary means to start financial planning. Have you been introduced to the 50/30/20 hard and fast rule for financial planning? Well, it states that 50% of your income should go for your needs, 30% to satisfy your wants and 20% to your savings. If you can increase the percentage of savings, it will be a good financial initiative to secure your life. You can decide on the monthly budget based on the following steps:
     

    • List down all the different sources of income.

    • Write the different types of essential expenses such as groceries, medicines, etc. Reserve a fund for your savings.

    • Write down other expenses such as relating to travel, clothing, entertainment, etc.

    • Allocate your different sources of income to the necessary expenses based on your priorities.

    • Ensure not to exceed beyond the allocated funds.
       

    If you have this monthly budget plan active, your life will get financially stable while saving funds for the future and helping you plan for early retirement.


  • Make a long-term financial plan - Having a long-term plan is an important financial planning tip. It will help your savings fund reach the essential money goals to satisfy your personal and family financial obligations. Here are a few steps to do financial planning effectively.


    • Write down your short-term and long-term financial goals. Short-term goals can be purchasing a new car, home appliances, etc., And long-term money goals can be paying for your child's higher education, planning for their marriage, etc.

    • Calculate the approximate funds required to accomplish such financial objectives.

    • Decide on the timelines to ensure the same.

    • Based on the financial goals and the timelines, decide on the type of investments.

    • Ensure to choose investments with more liquidity to satisfy the short-term goals and the others that can help in capital appreciation to account for the inflation rate that can help accomplish your long-term goals satisfactorily.

    • Tax* Deducted At Source(TDS) can be burdensome for many salaried employees. Therefore, purchasing tax*-saving investments is one of the most important tax* planning tips for salaried employees to reduce the payable tax* liability.

    • If your family is dependent on you for their survival in any way, saving in life insurance policies becomes extremely vital. It will help your families reduce the financial burden in the event of your unexpected demise.


    Insurers have been providing customisable, comprehensive life insurance plans that combine life cover with savings and investment benefits. For example, when you purchase TATA AIA plans, you can opt for savings or wealth insurance plans. The savings plans provide a guaranteed1 return at maturity, and the wealth insurance plans help you invest in financial securities.


    You can purchase them online by observing details with respect to features and cost. Life insurance plans provide a tax* deduction and exemption benefit based on the premium paid and the payout received.


  • Retirement planning - Retirement planning is another important financial objective to help lead a peaceful life after the difficult and busy employment phase. Here are a few early retirement planning tips.
     

    • Start planning for your retirement early when you start your career.

    • Based on your lifestyle, decide on the kind of expenses that you might have to incur daily.

    • Calculate the expenses accounting for the inflation rate.

    • Save or invest in a financial product that can accumulate a huge corpus for your future retirement financial needs.

    • Choose an annuity plan to invest the corpus earned during your employment phase. The immediate annuity plan will start providing the regular income immediately after the purchase of the annuity plan, and the deferred annuity plan will start providing the regular income after a deferred date.


    Financial planning for a salaried employee is important to devise the right strategies to spend, save and invest money wisely. But, unfortunately, some people spend their income in the first few days and suffer towards the end of the month. And many save a good amount of money but never know how to invest in securing the future while also enjoying the current life. So, working on a financial plan becomes very important!


Conclusion


Financial planning is essential to ensure financial independence that can pave the way for early retirement. You must understand your priorities, figure out your different sources of income, and make a monthly budget and a long-term financial plan at a younger age to secure your future.


Equally important is finding retirement planning solutions to help you lead a peaceful life at an older age. While there are different financial investment options, choosing the right products early in life and staying invested should be a primary money goal!

In addition, many tax*-saving investments can help you invest for capital appreciation while also saving taxes*. Therefore, be informed, plan early, secure your future and lead a happy life after your salaried employment life!


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Tata AIA Life Insurance

A joint venture between Tata Sons Pvt. Ltd. and AIA Group Ltd. (AIA),  Tata AIA Life Insurance  is one of the leading life insurance providers in India. We post everything you need to know about life insurance, tax savings and a variety of lateral topics such as savings and investments in this space. You can access and read a host of different blogs, articles and pages at the Tata AIA Life Insurance Knowledge Center or get in touch with us with any queries or questions!

View all posts by Tata AIA Life Insurance

Frequently Asked Questions

How can salaried people do tax* planning?

Section 80C of the Income Tax Act, 1961 provides a tax* deduction benefit of up to ₹1,50,000 for the investment made in certain financial products such as Life Insurance Plans, Equity Linked Savings Schemes, National Pension Schemes, Senior Citizens' Savings Schemes, etc. Therefore, salaried people can invest in such financial products to reduce their tax* liability and accumulate funds to secure the future.

When should I start financial planning if I am a salaried employee, and Why?

Financial planning can start when you start your career and earning. It can be between 25 and 30 years of age. You will have lesser financial liabilities, a longer investment time, and a better risk appetite at that age. It will help you accumulate huge funds, save on taxes* and secure your future comfortably.

Disclaimer

  • Insurance cover is available under the product.
  • The products are underwritten by Tata AIA Life Insurance Company Ltd.
  • The plans are not a guaranteed issuance plan, and it will be subject to Company’s underwriting and acceptance.
  • For more details on risk factors, terms and conditions please read sales brochure carefully before concluding a sale.
  • This blog is for information and illustrative purposes only and does not purport to any financial or investment services and do not offer or form part of any offer or recommendation. The information is not and should not be regarded as investment advice or as a recommendation regarding any particular security or course of action.
  • Please know the associated risks and the applicable charges, from your Insurance agent or the Intermediary or policy document issued by the insurance company.
  • Every effort is made to ensure that all information contained in this blog is accurate at the date of publication, however, the Tata AIA Life shall not have any liability for any damages of any kind (including but not limited to errors and omissions) whatsoever relating to this material.
  • *Income Tax benefits would be available as per the prevailing income tax laws, subject to fulfilment of conditions stipulated therein. Income Tax laws are subject to change from time to time. Tata AIA Life Insurance Company Ltd. does not assume responsibility on tax implications mentioned anywhere in this document. Please consult your own tax consultant to know the tax benefits available to you.
  • 1Guaranteed Returns/Payouts depend on Plan Option, Policy Term, Premium Payment Term and Age at entry