Month of March is nearby and tax planning season is at peak. Often in the process of selecting right product for saving tax, we miss the basic financial planning process.

What is financial planning & why is it important? Financial Planning is a step by step process of analysing your current situation and focusing on what is priority investment decision one has to take. While one needs to visit his/her financial advisor preferably a CFP for detailed analysis, certainly there are some basic things one can analyse by self.

Following are some basic points of Financial Planning:

  1. Emergency (Contingency) Fund: Any financial planning is incomplete without discussing emergency situation. No matter how well we plan, there remains a concern for uncertain situation one might face. Do I have fund for 3 to 6 months of my monthly expense in case of a secured job? In case of business or self employment where earning pattern are not as regular as a secured job, 6 to 12 months of fund can be a great support.
  2. Risk (Insurance) Planning: Thumb rule of financial planning, never mix insurance with investment. Are your life, health & property having appropriate insurance cover? This requires a detailed analysis. But at least sufficient pure term plan (25 to 30 times of my yearly income), health insurance for the whole family & other insurance for the properties can save from a major financial loss. Thus, first two steps help to avoid major obstacles in wealth creation journey while we focus on our future goals. (An expert is highly recommended to define your insurance need.)
  3. Identifying Investment Needs: Plan last thing first, have you planned your retirement? Remember, you can get a loan for all other needs but not for retirement! (Same like you can get insurance only when you don’t need one!) A financial advisor can help you in this area to first define an ideal corpus for your retirement. Once you have your target in place, you can invest either monthly or yearly for it. Then there are multiple needs like child education and other important goals.
  4. Deciding Other Dreams: What is the use of planning if it doesn’t motivate you? Dreams provide us the fuel, the very purpose of our economical activities. Whether it is your dream home or travelling the world, you can decide what you want to enjoy your material life. But remember, it comes after you have made provision for your mandatory requirements!

Any financial plan becomes robust with clarity & a good financial advisor.

To know more about financial planning & design your own plan, you can call us on 9879956949 or email us at hardik@niveshplanner.com.