We all know that a proper financial plan is needed, to reach your goals. So today, I will make financial planning very easy for you. Just by giving a few minutes a month, you can do your financial planning and fulfill all of your dreams.
In this article I’m going to tell you, 6 steps simple, financial planning, which you can do yourself and complete all of your financial goals.
Simple Financial Planning
Before starting let me tell you , I’ll try to make this 6 steps to be as simple as possible. Because a good financial plan should be simple and effective if that plan is too complex, then it’s not a good plan. The first quality of a good financial plan is, that it’s simple. So this 6 steps are :
Savings
Managing Loans or Debt
Insurance
Investment Planning
Tax Planning
Retirement Planning
1. Savings :
Let’s start first with savings. One thumb rule of saving There should be an emergency fund in your saving account i.e the amount should be 6 times of your monthly expenses so in any case you loose your job you have atleast 6 months of financial backup with you in your saving account.
2. Loans/Debts :
Second step, Managing Loans/Debts : Two types of loans are there, good loans and bad loans. What are good loans? Housing loans are good because it’s very cheap, around 8% to 8.5% and has tax benefits, so don’s rush to prepay them.
But If you have a personal loan, where you are paying 12%-14% and also investing in mutual funds, which gives you 14%-15% return instead of investing in mutual funds, it’s better to gather all the money and end this load, where you are paying 13%-14%.
So second step is, to end all the bad, high-interest loans before starting an investment, your focus should be on ending all the loans where you are paying interest of 12% or more. This is the second step, stopping all the expensive EMI.
3. Insurance :
Now comes third step, Insurance and this step scares many people. Keeping insurance very simple. The first thing is life insurance, second is medical insurance.
Life insurance is must for the earning members of the house if you are the only earning member in your family
The amount of insurance cover is decided on the basis of your yearly income. If your yearly earning is Rs-4,00,000 then you have to take life insurance of 20x times that money. Means Rs-4,00,000 x 20, which is Rs-80,00,000 you have to take Rs-80,00,000 Basic life cover also, you can take Critical illness cover with that. If you are roughly around 30-35 years then the yearly premium will be around Rs-10,000-11,000 less than Rs-1000 a month and you’ll get life coverage of Rs-1 crore.
So now your Life Insurance problem is solved.
Now, let’s come to Health Insurance. Everyone in your family should have a health insurance you, per person should have around Rs-2,00,000 of life insurance it can be less if you can’t afford it now. Better than not taking insurance, By doing this you get Life Insurance, Critical Illness, and Health Insurance so your insurance needs are over.
4. Investment :
Now let’s talk about the most important step. Fourth, which is your investment. What investment options are there in which you can invest equity stocks or mutual funds there after that, it’s important to diversify in gold besides that, there is real estate. So let’s talk about them one by one.
Equity, and in equity stocks and mutual funds my personal advice for most the people is, if your retirement is far away and your goals are also far away if there’s time for a kid’s marriage and time for their education expenses so you must get a little exposure in stocks. How much to take and in which stocks, you can consult it with any financial planner
Second comes gold, everyone should invest in gold and it’s the best way is not by buying gold jewelry it takes making changes and when it’s melted there are deductions many more complications and returns are not good. If you are taking gold for investment, then the best way is Sovereign Gold Bond. Were as much the gold price appreciates, you’ll get that return and you will also get 2.5% fixed annual return. This Sovereign Gold Bond, according to us, everyone must take. So your gold investment is done through Sovereign Gold Bond.
After this comes Real-estate. . Everyone must take one house for their living and you can take it with a home loan. If you have a business and you need a permanent shop or office so you can take an office for your business and profession.
5. Tax Planning :
Now let’s talk about tax planning. Tax planning is need for those who makes more than Rs – 6,00,000 a year. So if you earn less than that, then you don’t need too much tax planning you will get a deduction on your kid’s college fees you’ll get a deduction on some expenses and on LIC policies and if you invest in some tax savings funds, then you’ll get some deductions. If your earnings are more than Rs-6,00,000, then you need to do good tax planning, there are many steps. Use 80 C fully, where you can save Rs-1,50,000 on mutual funds buy life insurance and can show your incomes less. So in you make Rs-7,50,000, then Rs-1,50,000 will go in your 80 C and won’t be counted in your income. You take an NPS of Rs-50,000, you’ll get a deduction there you’ll get Health insurance deduction, home loan deduction so take all these deductions. Your tax will be reduced and you’ll make good savings and this tax planning is not that difficult.
6. Retirement Planning :
After this comes to the last thing, which is Retirement planning. So retirement planning is very simple, you just see your today’s expenses. So think, there are 15 years left in your retirement so from today put that much money in NPS that you get Rs-55,000 after retirement. So you just have to open an SIP calculator, you can open it on Google there you see, how much will you invest from this month and that will increase by 10-11%, which NPS return gives around 10-12% you take around 10 or 11. So you invest that much money, which will increase by 10-11% after 60 years, with an annuity plan, if you take the annuity plan of that money you will start to get Rs-55,000. If you do all this, then your 6 steps financial plan is over.
So in this Way you secured your life. So this is that simple, don’t bring that many complications you must keep instruments as small as possible and make less paperwork. If something happens to you, then your family can keep and understand those papers and you take advantages of the insurance. It’s important to keep thing simple. A good financial plan is that, which is simple. Now your planning is complete you took 3-4 mutual funds, 1-2 tax saving funds you took Sovereign Gold Bond, NPS, one health insurance, one life insurance and kept six month equal money in savings account where you can get FD like returns in emergency funds. If you have done all these, then your financial plan is complete and it’s that simple