What’s the right way to financial planning? Find out
A good financial plan can help individuals achieve financial independence that is key for stability. It should factor in the risk appetite and evolving financial demands of a person and is a long term process.
What is Financial planning?
Financial planning should ideally evaluate the best savings, credit, investment and protection mix to meet one financial milestone. Having said so, according to industry experts most people are usually not in line with their finances. Usually seen, people have huge debts, credit card dues, and not the proper line of savings and investments in place to meet their financial milestone.
What is balanced financial planning?
Financial experts say balanced financial planning is the key to financial stability. Navin Chandani, MD and CEO, CRIF High Mark, says “A good financial plan can help individuals achieve financial independence that is key for stability. It should factor in the risk appetite and evolving financial demands of a person and is a long term process.” He further adds, “A balanced portfolio should proportionately distribute assets in growth and savings instruments through investments in various asset classes. In addition, if a person has taken a loan or uses a credit card, it is crucial that the EMI and credit card bills are paid on time.” Hence, a holistic approach to savings, investment, insurance and credit utilisations is critical in financial planning.”
How to attain financial stability to meet different life stage goals?
Experts say, financial needs of every individual evolve over time and one should plan accordingly. Chandani, adds “It is important to chart these out across expenses such as higher education, leisure, wedding, child care, starting one’s own venture or even early retirement. Availing loans for meeting some financial requirements not only helps in systematic financial planning but also helps in tax management and parking aside savings for better investment avenues.”
Here is how you can bring financial stability;
• Discipline is the key – Begin early and make it a habit to set aside a portion of monthly income in a savings instrument.
• Stick to the budget – Create a monthly budget by analyzing all the expenditures and adhering to a strict spending plan. Chandani says, “It’s the most effective way to keep bills paid and savings on track.”
• Keep a check – Take advantage of credit options that are tailored to an individual’s repayment capability. Track credit reports on a regular basis to keep a track of financial standing.
• Don’t be late – Make good use of credit cards and make sure payments are made on time.
• Work smart – Experts believe it is better to invest in income-generating investments that are expected to appreciate in value over time.
• Create a balance – Ascertain that portfolio is well-balanced, using the right asset allocation strategy and a good mix of secured and unsecured loans for suited financial goals.
• Prevention is better than cure – Create an emergency fund apart from daily investments to cover unexpected expenses, ensuring that savings are never depleted. Chandani says, “An emergency fund can also be used to pay off an EMI and prevent defaults.” Additionally, take health and term insurance, to help you stay protected during a crisis.
• Maintain a good credit score – It will assist an individual in obtaining the best credit opportunities at any point in life.
Source: Publication: Financialexpress,10th May ,2021