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.