Financial
planning is a process of meeting financial goals through proper money
management. Financial goals could be short term like going on a vacation,
mid-term like buying a car or long term like retirement or
buying a house. Financial planning helps achieve strategic goals and
objectives.
Take a look at financial
planning thumb rules. One of the first rules of financial planning
is Pay Yourself First. Save a part of monthly income before
spending. As income rises make sure to save more. Follow the 50-20-30
rule. About 50% of your income should go for living expenses, 20% for
savings for medium/long term goals and 30% for spending like travel and
vacation.
Want to know more on financial
planning? We at IndianMoney Review
will make it easy for you. Just give us a missed call on 022 6181 6111 to
explore our unique Free Advisory Service. IndianMoney.com is not a seller of any
financial products. We only provide FREE financial advice/education to ensure
that you are not misguided while buying any kind of financial products.
Why you should regularly review your financial plan?
Why do you go for a medical check-up at regular intervals?
Isn’t it to stay in good health? In much the same way, the financial plan
requires a regular review.
Set achievable goals: When setting financial
goals it is very important to set achievable goals. Setting unachievable goals
demoralizes you and it’s a setback to the financial plan. If you have set
unachievable financial goals, review the financial plan. Review both the
financial instruments you have invested and the investment. A simple example of
financial plan review is if you have set a financial goal to retire at 55 and
find the money insufficient, reset the retirement age at 60. Let’s say you had
planned to buy a house for Rs 90 Lakhs. You find the investment insufficient?
Then settle for a house of Rs 75 Lakhs.
Salary is hiked: A hike in salary calls for
review of financial
goals. A big salary hike means financial plan review. You might have got a
windfall like EPF money or
an inheritance. It’s time to revise investments and investment objectives. You
can set new financial goals or allocate more money towards investments.
Set up an emergency fund: As your family grows
you need an emergency fund. Keep at least 3 months of living expenses in the emergency
fund if you are single. Make this 6 months if you are married.
Increase in number of dependents: If there is an
increase in the number of dependents (say the birth of a child), review
financial plan. You might need additional life or health
insurance. You would have to set aside more money towards investments. Make
sure you do Estate Planning by writing a WILL as dependents increase to avoid
fights and controversy.
Change in the tax status: Let’s say you have
changed your job and got a salary hike. This puts you in the higher tax
slab. You might need to focus on tax planning to save more money.
Your risk tolerance and risk appetite have changed: If
you have turned from a conservative investor to an aggressive investor, review
financial plan. You might have to review the investment plan as you go for more
aggressive investments.
What to consider in financial review?
- IndianMoney.com Reviews advises you to update financial advisor on life changes: Your financial advisor must know your important milestones to make the right financial decision. If you are newly married, this calls for a financial plan review. Your financial advisor will draw up a new plan or reform the current financial plan.
- IndianMoney.com advises you to check your investments: Check if investments are giving returns in line with the financial plan. If investments are not performing up to standard, then decide where to allocate the money. Asset allocation is very important in a financial plan.
- Is your retirement on track: Healthy ROI (Return on Investment) and more allocation of money towards retirement helps retire early? Do financial review to check if investments are on track to achieve early retirement.
- Interact with financial advisor: Your financial advisor knows a lot of people (has handled a lot of clients) with similar financial goals or who have been in similar situations. He is in a unique situation to help with financial and life goals.
Read More article: Review
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