Financial planning is the planning done by considering income, expenses, savings, investments, or long-term goals. Today’s money saving habbits securing the future. Money planning is not just for the rich, but is essential for anyone who wants to secure their future.
Financial planning is the planning done by considering income, expenses, savings, investments, or long-term goals. Financial planning is about managing today’s money wisely and securing the future. Financial planning is not just for the rich, but is essential for anyone who wants to secure their future.
Financial Planning
- Budget
- Emergency Fund
- Insurance Planning
- Investment Planning
- Tax Planning
- Retirement Planning
- Wealth Creation
Why is Financial Planning Necessary?
Many people think that everything is going on right now, I will see later, this creates problems for them in the future.
Uncertain Future
No one knows when illness or accidents will strike. No one can predict when a job will be lost or a business will suffer losses.
Avoid inflection
you get for ₹100 today that will cost ₹200, ₹300, or even more After in 10 years. If you don’t invest your money, its value will decrease with time . That’s why it’s crucial to invest your money wisely.
Avoid financial stress
Unplanned spending increases, EMI & debt burdens also increases mental stress. Financial planning keeps expenses under control, reduces debt, and maintains mental peace.
Achieve big goals
- Buying a home
- Children’s education
- Marriage
- Retirement
- Foreign travel
All of these require financial planning. Key Steps of Financial Planning Financial planning is not a process, it is a continuous process. It has several steps.
Set Financial Goals
Set Financial Goals first and most important step because you need to know how much money to save and where to invest.
Short-term goals
Emergency Fund Vacation Gadget Purchase
Medium-term goals Buying a Car Starting a Business
Long-term Goals
Child Education Child Marriage Retirement Wealth Creation
Goals
- specific
- measurable
- achievable
- realistic
- time-bound.
Tracking Income and Expenses
Income
- Salary
- Business Income
- Freelancing
- Rent
- Interest/Dividend
Expenses
- Rent, EMI, Fees
- Food, Travel, and Shopping
- Lifestyle Expenses
- This helps you determine how much money you’re saving and how much you’re incurring on unnecessary expenses.
Creating a Budget
The budget is the foundation of your financial planning. Its most popular principle is 50:30:20. Needs/Wants/Savings and Investments. If possible, save more than 20%.
Emergency fund
An emergency fund is useful in dealing with unexpected situations. If we have an emergency fund already established, our savings are protected against unexpected events. Therefore, you should have emergency funds equivalent to at least 6 months of expenses, preferably 9 to 12 months.
Invest this in a convenient location where liquidity is abundant so you can easily withdraw this money when needed.
Insurance Planning
Health Insurance Medical and hospital expenses are very high, so you should factor this into your financial planning because a single illness can devastate your entire life’s earnings.
Term Life Insurance
If you are the first in a family, you should definitely get it. You should have coverage of 10 to 15 times your annual income.
Investment Planning
The rationale for investing is to beat inflation and create wealth. Investments should always be time-based, goal-based, and risk-aware. Investments should be made in different asset classes, such as equity, debt, gold, and real estate. Don’t keep all your money in one basket.
