We want to be prosperous, become rich, and live with happiness. On the other hand, we start a job, and with the first salary, we can meet every desire that was not able to do so for want of money. It continues. Never go to expensive gadgets, ever precious clothes, and shoes, sometimes on dream destination. Credit cards are also usually found sometime after starting a job. Then the expenditure is not controlled. The salary is eliminated in filling the credit card bill and essential activities. Ironically, we are falling into the quagmire of spending and debt without thinking about our future goals.
Have you ever wondered whether the life of any human being revolves between his dreams, responsibilities, and aspirations? All these require money. Every human life has some goals, such as buying a house, studying children and marrying, comfy retirement, etc. There are a lot of needs and fewer resources. Among all this, you need financial planning to achieve financial goals. The stronger your financial planning, the happier your future, you will be financially prosperous.
What is Financial Planning?
The process of financial planning is quite simple. “In the whole process of financial planning, you have to first identify your goals and prioritize them. Then, while analyzing the current economic situation, its limited resources are used to achieve financial goals. You can make changes to financial goals if required by your cash flow. It is also necessary to review it from time to time. Now let’s talk about how to start financial planning.
Investment
The role of investment is most important in achieving your financial goals. Investment should be combined with the target. Your investment should be linked to similar goals. If the target is two years later, invest in a date. Up to 5 years investing in hybrid mutual funds, i.e., 40-50% in equity and remaining in debt. For up to 5-10 years, you can invest up to 60-70% in equity. If your target is 10 years later, you can invest up to 80-90% in equity. Do not take any long term investment unless the target is achieved.
Insurance
Insurance/family members/ The dependents are financially compensated for the loss of income in unforeseen situations like accident or death. You evaluate your insurance needs and keep it with adequate life insurance cover accordingly. Generally, life insurance should be 10-12 times the annual income of a person. However, it depends on the income, age, and liabilities of a person. The cheapest option of life insurance is term insurance that you can also take online at home.
Tax Planning
Start your tax planning from the beginning of every financial year and invest some money in this item. If you take into account the provisions of taxation, you will not make any mistake at the last minute, and your cash flow can remain uniform throughout the year. Also, review other options available in addition to section 80C for tax saving.
Create a budget
The most important in financial planning is to see how much money is coming from and where they are going. With the start of earnings, the budget should be made. It should write all your expenses and also provide for how to meet it in your cash flow during an unexpected expenditure.
Analysis
Even after the implementation of financial planning, you must keep an eye on the performance of your portfolio. In fact, most people do not stay consistent with their plan and make mistakes, which they suffer as a loss. It is a beginning to prepare a financial plan. Most importantly, that plan should be implemented in a disciplined manner.
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