5 Most Important Aspects of Personal Finance and How to Maximize Your Returns with a Financial Expert.

The most common advice for a financial goal is to create a plan. However, it’s easier said than done. You may find it difficult to carve your financial path by creating a good portfolio. It is always advisable to seek help from a Financial Consultant. By consulting a financial advisor you can accrue high returns since the professionals are specialized and qualified in finance-related dynamics.

Personal finance is financial security for any person. Financial literacy and awareness is the key to financial capability and independence. Personal finance decisions require a high financial awareness quotient. Financial Consultants help in building a balanced portfolio in consideration of your
risk tolerance, active income, tax implications, and legal imperatives to accrue maximum returns.

Top 5 aspects of Personal Finance

Personal finance is the process of managing your money. It is a broader term that accommodates several financial parameters. The five pillars of personal finance are:

1. What you save

Your savings determine your financial health. If you park money as savings, you are creating an emergency fund. Creating a contingency fund regularly may act as a shield during an unexpected, unforeseen, and unpredictable event that may lead to loss.

Liquid funds are one such example of an emergency fund. They carry nil risk in terms of credit and interest. Your savings in liquid funds may last for a short term (3-6 months) that can be withdrawn within the week of saving. It is highly liquid and also yields better returns when compared to Fixed Deposits.

Setting money aside as savings can be a blessing in disguise at any emergency event. Thus, what you save is a paramount factor of your personal finance to maximize returns.

2. What you invest

Investments help you in growing money while you sleep!

You can invest your money in different baskets that can help in creating a balanced portfolio that accrues high returns in the long run. To build an investment portfolio you require financial acumen. Your folio depends on your :

  • Financial goal
  • Risk tolerance level
  • Type of investment choices
  • Time frame

Stock markets are a great avenue to maximize returns. It may be in the form of mutual fund investments or investments in stocks.

The time frame is one of the key factors that determine which investment option to choose. You may have financial goals to accomplish on a short, medium, or long-term basis.

3. How you protect

Insurance helps in protecting against risks and exposures. To maximize returns in the future, you may need insurance as a protective umbrella.

In personal finance, health and life insurance is a must. Good protection cover availed today can help in a better future. Some of the most important insurance to consider apart from health and life insurance are:

  • Personal Accident Insurance
  • Mortgage Protection Insurance

4. How you plan your taxes

Personal finance includes planning for taxes. Tax planning helps in tax saving. If you begin tax saving today, you can accrue benefits in the future. Careful planning in consideration of applicable deductions and exemptions can help you save taxes.

Indirect taxes are mostly unavoidable since they are related to consumption. You can save direct taxes vigilantly. However, tax saving is a different concept from tax deduction, tax evasion, tax avoidance, and tax exemption. Tax harvesting helps in wise tax planning.

5. How do you plan your retirement?

Planning for retirement includes:

  • Creating a retirement corpus from an early stage
  • Retirement financing during retirement

Personal finance is crucial to plan for retirement and also during retirement. It is always better to start creating a retirement corpus at an early stage of life. A discipline develops when you begin saving and investing in your future at the beginning stage of your earnings for your retirement. You can generate wealth for generations while creating a retirement corpus.

During retirement, you may need security for which you need retirement financing. Your risk appetite may be much lesser during retirement and hence it is advisable to exercise risk-free or lower risky investments and savings baskets.

How to maximize your returns with a financial expert?

There is a noise of information when you search on the internet about personal finance tips. It may be challenging to cut through the noise and find what’s best for you.

A financial advisor helps with authentic, structured, and directional personal finance tips. Consulting a financial advisor helps in outsourcing the solution of your financial worries and ambiguities to specialists and analysts in the field of personal finance.

You can just sit back on your armchair and concentrate on your mainstream job, while your financial consultants help in managing your money.

If you choose to manage your finances, you are likely to monitor the market every now and then, which may lead to a likelihood of missing out or mistaking an opportunity. A financial advisor eliminates such exposures by carefully studying your needs, goals, and risk levels.

The ways in which financial consultants help are as follows:

  • Act as a financial behavioral coach

Financial consultants act as a reliable bridge between you and your finances. You may rail off from accruing returns if you do financing on your own. A financial advisor acts as a financial behavioral coach on advising the right track of financial planning.

  • Value addition

Financial advisors help in adding immense value to your portfolio. To aim for both growth and value, a consultation with a financial advisor can be that great value addition in terms of quantifiable quality.

  • Investment planning partner

Financial Consultants may be your perfect investment partner to manage your finances in the most optimum and sustainable manner. Investment planning is the real agent in return maximization.

  • Retirement planning partner

A financial advisor helps in designing a retirement blueprint that can help you navigate to a better future.

  • Financial Counselor

Financial consultants may help in financial counseling during any ad-hoc, strategic, and overall financial requirements

Route to maximizing returns

Any investor wishes to maximize returns. Maximizing returns would mean such a balanced portfolio that accrues returns periodically or at the end of its tenure. Capital appreciation is the most important parameter that an investor aims to achieve and financial advisors strive to assure.

It is important to compare financial advisors in terms of fee, reputation, and clients before choosing the best one that suits your financial goals and needs.




What are the Safe Investment Options in 2022?

With the lessons from the ongoing pandemic, individuals have realized that investing is an absolute need of the hour. Individuals need to make savings a step further. Investing is best leveraged when one follows a disciplined and systematic manner.

What to Consider

While planning your investing discipline, you should consider the following aspects:

  • Analyze Your Finances
    It is crucial to understand where you financially stand at present and what you want to create in the future. Consider your financial obligations and map out the distance between current finances and the futuristic value you want. Subtract your financial obligations from your regular income – this amount you can consider to invest.
  • Consider Timelines for Your Financial Aims
    You are familiar with the finances at hand and your financial goals. Stay realistic and make sure you determine the duration to meet your financial aims. If you want to invest for your retirement, it is necessary to consider the amount that needs to be devoted to achieve this goal.
  • Determine Your Risk Appetite
    An investor should know his/her limitations and scope for investments based on the risk appetite. It helps investors find aligned investment opportunities at the desired level of risk. An investor’s risk profile varies by factors like regular income, financial obligations, dependents, age, etc. Your risk-taking capacity may reduce with increased financial obligations or on being closer to retirement.
  • Ensure Liquidity due to Ongoing Pandemic
    Most investors prefer an investment with easy liquidity due to the pandemic. Though it is wise to have an emergency reserve aside, your investment portfolio must have enough liquidity. Make sure you pay the least penalty for early redemption of your investment.
  • Diversification to Even Out Risks
    The saying – do not put all your eggs in one basket – goes with every investment portfolio. It helps minimize risks. Also, it does not limit your capital growth to a single instrument. You can assure the safety of capital and guaranteed returns with a fixed deposit, but to minimize the impacts of inflation, you may need to include stocks in your portfolio. Similarly, your stock investment may bring losses for you due to a sudden slump in economic growth, but fixed deposits in your portfolio can manage risk.
  • Tax-efficiency
    As the new year is around the corner, most investors look at financial planning with tax savings. Like others, you can consider various Small Saving Schemes like Sukanya Samriddhi Yojana, NSC, PPF, NPS, and fixed deposits.

Investments to Ensure Safety

1. Fixed Deposits

Fixed deposits (FDs) are debt instruments. Most risk-averse investors highly prefer FDs as they are not market-driven investments. Reserve Bank of India (RBI) has remained the repo rate unchanged at 4% and reverse repo at 3.35% to support economic growth.

  • It is a secure investment with various benefits – low deposit amount, flexible tenor, stable and regular returns, tax benefits under Section 80C, Income Tax Act, and easy redemption.
  • You can invest in FDs for seven days to ten years, depending on the financial institution you choose. To increase flexibility, you can create an FD ladder with different maturities.
  • You can save income tax with 5-years tax-saving fixed deposits. You should know that investors need to put the initial investment amount for the entire tenure of 5 years. There is no pre-maturity withdrawal facility.
  • For higher interest rates than banks, you can consider corporate fixed deposits with renowned NBFCs. You can find a few leading NBFCs that have increased the FD interest rates in 2022 and offer up to 7.05%. With banks, it is 5.25-5.5%.

2. Public Provident Funds

At present, the Public Provident Fund (PPF) offers an interest rate of 7.1%. The Government reviews the interest rate quarterly. In the past, PPF depositors have earned higher interest up to 12%.

– It is considered a safe investment as it is a sovereign investment – fully guaranteed by the Central Government.
– You need to invest for 15 years. However, it allows you to withdraw prematurely after completing five years.
– You can deposit in your PPF account up to Rs 1.5 lakh in a financial year.
– It is a savings-cum-tax-saving investment in India. It will provide you with tax-free interest.

3. National Pension System (NPS)

NPS is a market-linked voluntary retirement savings scheme with the Central Government of India under the purview of the Pension Fund Regulatory and Development Authority (PFRDA). The NPS is one of the safe schemes for individuals with a low-risk profile.

– The age limit to subscribe to NPS is 18 to 65 years.
– You can withdraw prematurely after completing ten years in NPS.
– A subscriber is eligible for tax deduction under Section 80C and under Section 80 CCD 1(B).
– Returns on the NPS eventually depend on asset performance in the market. It invests in Government Bonds, Equities, Corporate Funds, Real Estate Investments Trust (REIT), Commercial Mortgage-Backed Securities, and Alternative Investment Funds (AIFs).

4. Dividend-Paying Stocks

Companies that are regular to pay dividends can be a safe investment. The IMF (International Monetary Fund) has projected the growth prospects of the Indian Economy at 8.5%. These are well-established companies with a track record of steady growth and regular dividends.

– Dividend investing is an appealing strategy for investors with a lower risk profile. It comes with two sources of potential income – regular dividend and capital appreciation with an increase in stock price.
– It can be risky if you can not make the right decision on what to avoid. Every company can not maintain a regular payout in every economic environment, like the present pandemic and its new variants. A diversified portfolio of dividend stocks can be a solution to make it safe and a steady income source.
– For a diligent pick of dividend-paying stocks:
– A company should have recorded a dividend yield of 3% or more.
– The proportion of earnings that the stock pays to its shareholders should be over 40%.
– The dividend-paying scrip with a drawn dividend policy

Few companies that have paid a high regular dividend to their shareholders are Clariant Chemicals (dividend yield of 11.2%)
Coal India (dividend yield of 9.9%), and Bharat Petroleum Corporation (dividend yield of 9%).

5. Government Bonds

RBI manages the issue of government bonds under the category of government securities (G-secs). It is considered a safe investment with the Government back. It is a contract between an investor and the Government to provide interest at a predetermined interest rate for a specified period.

– Most of the time, it is issued with a fixed coupon rate, but it can be a floating rate bond also.
– Investors need to invest funds for the long-term, i.e., 5-40 years. However, you can trade them on the stock exchange.
– Returns on these bonds are exempted from taxes under Section 10, Income Tax Act, 1961.

For an easy reach of the Government securities to individual investors in 2022, the apex bank in India has launched the RBI-Retail Direct Scheme. Retail Direct Gilt (RDG) Account allows individuals to apply for G-secs in the primary auctions and secondary market through a simplified investment process.