7 Golden Rules of Financial Planning

A world tour with family, a second home at the outskirts,comfortable retirement life – that’s what most of us desire. But to achieve each of them, one needs solid financial planning. Experts suggest financial planning should start the day you start working. And we cannot help but agree. To realize each of your future goals, you need to take action immediately and work systematically.

Let’s discuss the golden rules of financial planning that will take you to your goals successfully.

1. Get Your Financial Plan Early

This is always a good idea. Financial planning isn’t for your middle age or after you get settled in life. People early in their career often remain quite ignorant of such plans. But one should start the moment one starts earning. You got to start early, be it savings wise, investment wise or sorting your finance step by step. As soon as you begin your professional career it is advisable to have a plan in place.

2. Save First. Spend Later

We all have future goals – that long pending family holiday, a second home for your family, the car of your choice and so on. So reaching to your goals needs to have a path. That path begins with saving for your future. The moment money comes in your hand the first thing should come to your mind is saving a portion of it! The success formula for retiring rich is to save first once money comes in your hand (at-least 20% of your net monthly income) and then spend from balance money left. Financial planning begins with savings!

3. Step up with calculated risks

Once you are sorted with regular savings, you should now be open to take calculated and well thought-of risks. The kind of risk we are talking about is all about volatility in financial values. For instance, equity shares are known for their volatility but over period of time they also offer highest return on investment. With expert financial advisers and planners you can delegate a portion of your investment to equity and ensure long term growth for your long term goals.

4. Balance your investment options well

Your financial goals are diverse in nature – long term goals, short term goals, retirement plans, etc. In order to have a balance of all your financial needs, it’s wise to have a balanced investment
portfolio. You can take certain amount of risks for higher growth and return but you cannot put your complete investment value into risk. So, a certain part of your investment portfolio should be invested in highly secure components to balance the risk while maintaining overall growth.

5. Don’t let taxes affect your financial planning

If you are letting taxes take away major chunk of your earnings, then you are ought to affect your personal finance. Considering tax planning components is wise as it helps you to save money and
taxes both. Pick investment options that will let you save on your taxes and build on your finances, so you can achieve your retirement goals. It is advisable to differ your taxable income to your retirement by investing in pension schemes because your tax slabs will be lower post your retirement then today.

6. Consider Inflation

Inflation is a factor that needs to be considered at every stage of your life. Be it medical cost, education cost, commodity prices, it’s got to increase with every passing year. So, to maintain the same standard of living you should be prepared to beat inflation. To meet and sustain inflation adjusted expenses post retirement is our goal. We must keep a track of returns earned and make sure our returns are more than inflation rate.

7. Have your life covered

No matter how robust your financial planning looks, it amounts to nothing until you have arranged a security for all your investments and future objectives with a life insurance cover. In case of uncertain incidents, your family’s future shouldn’t be at stake. Their security should be covered, their future should be protected. So, besides making provision for growth focused investment always ensure that you have sufficient life insurance cover to take care of the uncertainty.

If you wish to plan your finances or you wish to set up an appointment for a one on one discussion, write to us on contact@sbsfin.com or connect here.

How to kick-start Personal Financial planning?

Worried of exhausting your bank balance? Tired of not reaching your financial goals? Stressed how to start financial planning?

Financial anxiety is real and it can creep in more when you see other people of your age are managing it well! However, we believe everyone has their own pace to put things on track. We also believe that noticing the fact that you are lagging behind is the first step that you have already taken! The next step is to dive in at once. Even if you make a few bad choices along the way, it’s okay. That’s better than to sit on the sidelines worrying that you won’t make the best possible choice. Because once you start, you can seize more opportunities for growth and experiences, and that it’s important to put your financial planning on track!

Here are a few simple yet effective ways to plan your finances. The most important key is start today!

Where you stand? Know that

Knowing where you stand is an important step even before you start planning for your finances. Where you stand implies what numbers you’re working with and how they add up. Start by taking financial inventory- credit score, debt load, account balances, assets, net worth. There are many free tacking software available online that can give you a clear idea where you stand financially at any given moment.

Where you want to head? Define your goal.

Any planning without a certain goal is a failed plan. After you figure out where you stand, it’s time to decide where you want to go. Make a list of your goals, the relative timeline and cost for each, and then prioritize from top to bottom. Only once you’ve marked both the origin and the destination, you can decide on the best route to take in order to reach the finish line.

Financial Planning? That’s the next step

Once you’ve taken your inventory and defined your goal, you should have a pretty clear idea of how much money you have and how much you need in order to tackle that list of prioritized goals. The next steps are to decide whether you need to pay off your debt or you need to begin contributing towards a retirement account or emergency fund. Or whether to save up for a down payment! There could be a lot many goals and seemingly never enough money to fund them all. So prioritize and act accordingly.

Stuck now? Categorizing Financial Goals will help

Ideally, you can fund all of your goal categories in addition to covering your monthly expenses – designating larger percentages of income to the goals you’re pursuing most aggressively. Unfortunately, reality isn’t always ideal, and income restrictions necessitate the prioritization of some financial goal categories over others. We recommend starting with emergency savings and debt payoff. With the given budget, if you can sneak even the tiniest bit of retirement savings into the equation that would be ideal, especially if your debt is low interest.

Besides, these funds, you should also save fund for your short and medium term goals – like having a family, owning a home, travelling, etc. These funding should be independent and not be connected with the retirement or emergency fund.

If you find yourself stretched thin in an attempt to fund all savings categories, you most definitely need to consider ways of increasing your income (a side hustle maybe or investment option to be considered). There are only so many ways you can save money an cut back on your day-to-day expenses. Earning potential however is unlimited, and the freedom and flexibility that comes with increased income is a game-changer for your financial and life goals.

Wondering about your kickstarting your personal financial planning ?? Want to know more about financial management to get debt free life. Feel free to write us on contact@sbsfin.com