Your Financial Plan : A Guide To Be Rich

 When you hear the word 'Financial Plan' , what you think of ? 

 Many people stay away from financial planning because they think it is very complex and they don't 

 have much knowledge . But due to this mindset they miss a lot of wealth creation opportunities.

                     If You have a good financial plan , you have a key to live a rich life. 

  But what is a good financial plan?  A good financial plan is always a simple plan and not a complex    one. A good financial plan must be simple and efficient . If a financial plan is very complex it is not   a good financial plan. So when your financial planner suggest you a complex financial you must consider it as a bad financial plan .

  

 Here are the simple steps to a good and efficient Financial Plan :

1.Savings:- This is your first step. When comes to savings, you need to be sure that you create a emergency fund through savings. You must keep a six month emergency fund in your savings account. For example, If your  house runs on monthly expenses of Rs.25000/- than you must keep Rs.150,000/- (Rs.25000*6) in your savings  account. If you loose your job , you must be     able to run your house for six months so that within that time  span you can find a new job. You can even approach your bank and get Fixed Deposit interest rates on your savings account.

                                         

  

2. Loans/Debts:- The second step is to clear the debts or loans which are bad. By bad I mean the loans or debts with high interest rates such as 12% or 14%. But other loans which have low interest rates such as housing loans which have 8% or 8.5% interest rates and they also they carry tax benefits. So don't be hurry in clearing these loans or debts but rather try clearing bad loans with high interest rates.
                                

3.Insurance: The third step is Insurance. When it comes to Insurance people have multiple insurance

 policies like term plan, endowment plans,etc.It makes your portfolio very complex. You only need basic insurance policies like Life Insurance ,Medical Insurance and Critical Illness Cover .  Life Insurance should be taken for the family members who earn. For example If you are the sole earner in your family , than you should take life cover. The amount of the life cover should be 20 times of your annual salary.If you earn Rs.4 Lakhs per annum than the life cover should be of  Rs.80 Lakhs (Rs.4 Lakhs *20). If you age is about 30 to 35 years than you can get about 1 crore life insurance policies for a annual premium around Rs.11,000. 

When comes to health insurance every member of your family must have medical insurance as today health is a very critical factor. The amount of the policy must depend upon how much you can afford. Atleast go for Rs.1 Lakh medical cover.
          It is advisable to take Life And Critical Illness Cover together at an early age may be in your late 20s or early 30s as the annual premium will be less and it will be fixed for lifetime.
   

4.Investments: The fourth and the most important step is Investments. You have a lot of options for investments like Equity where you can invest directly in stocks or mutual funds,

you have options of gold and real estate too. Lets first talk about equity.If your goals like retirement,marriage, funds for education which have a long time , than you must get an exposure to stocks. If you are confident about investing in stocks than you should invest but if you are not confident about it than you may take advisory services from financial advisors. But if you don't want to invest on advices of others than you should invest in mutual funds.

Now when it comes to gold you can invest in gold.It is advisable not to invest in gold  by purchasing jewelleries as it includes making charges and other deductions which does not provide good returns. The best way to invest in gold is by investing in Sovereign Gold Bond. In it you get the benefits from rise in price of gold but also get annual interest about 2.50% .It should not be a sole investment.It can be used to diversify your investments.

  Now when comes to real-estate ,it is not advisable to invest in real estate.Yes , you must have one home for you to live.You even get Home Loans at low rate of interest and other tax benefits. If you need a permanent office or shop you can take it. But other than that for investment purpose it is not a good idea. In real estate you have barriers such as complex paper-works ,property tax, maintenance expenses,etc.
  * The allocation of investments rest with you according to your risk-profile and your preferences. *

                                       

5.Tax planning:- It is mostly required for people having large earnings and paying huge taxes.If you do not earn more than you don't need  that much tax planning. You can get deductions of your kids college fees, LIC policy,home loans, tax-savings funds, NPS etc. You must optimum use of Section 80C where you can get deductions upto Rs.150,000/- .You  can get several other deductions .This helps to increase your savings.

                                                          

6.Retirement Planning:-  While comes to retirement planning, you need to consider your expenses.  For example, If you have 15 years to retire  ,you should invest monthly
in  National Pension System(NPS)where you get an interest of 10%-11% .The amount to invest monthly you can use SIP/NPS  calculator to calculate so that after the age of 60 years through annuity plan you get Rs.55000/- or a specific amount according to what you would require monthly after you retire.
                                     

 

The above steps completes your simple and effective financial plan. It is important to keep your plan simple and not include many instruments so that you and your family have a good understanding about your financial portfolio and paperworks to get optimum benefits from it. A good financial plan is that which is simple.

Your Financial Plan at Glance(must read the above points in detail):-
  1- 6 months emergency funds
  2- Clear high interest rates loans and debts
  3-Life Insurance ,Medical Insurance And Critical Health Cover
  4-Investments in Mutual funds,Stocks And Sovereign Gold Bond
  5- Investments in tax savings instruments
  6- Retirement planning through NPS

  It is that easy than you thought it would be.

 Hope you like this blog. Make sure to be connected with Fin Intime for such beneficial blogs.