Six Golden Rules for Financial Planning

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Six Golden Rules for Financial Planning
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Whether youre trying to save up for a foreign
vacation, buy that dream car, buy a new house or
even accumulate a corpus for retirement,
financial planning is the way to make it
happen. While your financial plan is designed to
cater to your individuality as an investor,
there are some fundamental rules that everyone
should know. So to help you strengthen your
foundations
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Here are the 6 golden rules of financial
planning- Start Saving early Adequate
Insurance Emergency / Contingency fund Tax
Planning Diversify your Assets
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Start Saving early When it comes to financial
planning, the earlier you start, the better. It
is only then that you can utilize the full power
of compounding. For example, if you start
investing INR 5000 per month at 8 per annum
when you are 25, then by the time of you retire
at 60, your corpus will have approximately INR
40 lakhs more than if you had started the same
when you are 30. Anyone nearing retirement age
will tell you the years slip by and building a
sizable nest egg becomes more difficult if you
dont start early. Youll also probably acquire
other expenses you may not have yet, such as a
mortgage and a family.
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Adequate Insurance
Make sure you have sufficient Insurance which
would protect and secure the well-being of you
and your family. Each insurance type would vary
from individual to individual as their needs
would differ as per the life stage levels. So
basic coverage of health, life, home and vehicle
insurances are a must in your financial plan.
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Emergency / Contingency fund Job loss, Pandemics
like Covid, Accidents and medical emergencies
are unpredictable events, but usually require
immediate attention. Maintaining an emergency
fund will ensure that neither your cash flow is
deterred, nor are your investments and goals
affected in the event of any contingency. Here it
is recommended that you set aside an amount of
around 6-9 months of your monthly expenses,
primarily composed of liquid funds.
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Tax Planning
Sir Franklin Templeton once said nothing in this
world is certain apart from death and taxes.
Heeding this advice, you should never avoid
paying your taxes whatever the reason as it
could affect your goals detrimentally in the
future. Then, because tax is inevitable, you
should have knowledge of the deduction that may
apply to you particularly, so that you can
optimise the tax efficiency of your financial
plan.
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Diversify your Assets
There should be a component included in your
financial plan to review your asset allocation
strategies against your risk profile at different
intervals. This will enable you to find the
right diversity of investments in equity and
other assets like bonds, mutual funds,
annuities, property, etc. over time. Here it is
good to remember that your propensity to take
risk is likely to decrease as you get older,
when there are other people who are dependent on
you.
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Retirement Planning at each stage of life A
comprehensive retirement plan is multifaceted,
and shifts focus based on the period of life you
occupy. In this sense, your retirement plan
should also include investments in equity and
other similar assets particularly in your 20s
and early 30s when you can take more risks. As
you grow older, you should think about making
contributions towards the National Pension
Scheme (NPS) or another annuity. This keeps your
savings secured, with assured returns for when
you decide to retire.
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Remembering these points will prove to be key
when you are in the process of financial
planning. Another important thing to remember is
the need to seek professional advice. In line
with this, working with a professional is a good
way to make sure that you dont commit any
costly errors while developing or executing your
financial plan. If you are looking forward to
invest and need consultation in Ahmedabad then
contact Promore Fintech, the best financial
investment firm
Read the Blog here - Six Golden Rules for
Financial Planning
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