Financial Planning
Financial planning helps you determine your short and long-term financial goals and create a balanced plan to meet those goals. Tax planning, prudent spending and careful budgeting will help you keep more of your hard earned cash. Capital: An increase in cash flow, can lead to an increase in capital.
Types of Financial Planning Models and Strategies
- Cash Flow Planning.
- Insurance Planning.
- Retirement Planning.
- Goal based Financial Planing
- Investment Planning.
- Tax Planning.
- Real Estate Planning.
General Thumb Rules of Financial Planning
- 30 % of your income must be used for Monthly living expenses.
- 30% of your income must be used for Liabilities repayments, if any..
- 30% of your income must be Saved and Invested for your future living.
- 10% of your income must be spared for Entertainments, vacations
- Must have Term Insurance ( 15 times of Annual income or 200 times of unavoidable expenses like grocery, school fee, EB /net bills, etc) to financially secure future of your dependents.
- Health Insurance is must (in spite of Group Mediclaim coverage given at office) .The persons are very tough and costly to enter into Mediclaim after 50 years of age,any illnesses (BP, Sugar,etc) ) .worst case take Critical care policy to avoid big claims. Office covers are normally having 2 to 3 lacs only. Medical inflation is 20%/pa. So minimum 5 lac or 2 times of your Annual income(whichever is higher) is advisable . TOP UP policies are very cheap now,
- SIX months expenses must be available for Emergency fund (should be invested in Liquid Funds,Ultra Short term debt funds, FD Etc)
- Must save 10% of your monthly salary for Retirement - Advice NPS /Mf sip (invest both in equity & debt )
- Buying second house for investment is not advisable (Survey reports - it will fetch you only around 3% return)
- After 45 years of age, not supposed to enter into any Big Liabilities (Higher education of children and wedding of children will happen around 45 to 50 only, so plan now for the same.)
- Have joint account @ Bank savings account. Advice 1 joint a/c, one separates each single Account
- Property must be Registered on both Husband and wife name. (As per legal act – after husband first legal heir is wife, after wife it will go to children only)
- Regular check on Nominations at all financial instruments. if not nominated, do it now..
- Only in insurance policy, Claims payable to Nominee. In other financial instruments legal heirs' certificate is must to get back the settlement
- Home loan must be registered and apply on both husband and wife name. (Both can get benefits on Home loan Tax benefits)
- Don’t take any financial investment decisions EMOTIONALLY, and also Avoid last minute tax saving investment decisions, plan well in advance..
- For your Jewelry locker, Only one lakh is payable by bank, if theft or fire happen at bank. Provided insurance done.
- Like same way Government guaranteed only five lakhs for your FD also. (Fixed deposits with Banks upto Rs. 5 lakh only are backed by deposit insurance)
- Must know all Tax implications. You cannot avoid paying tax. But you can minimize by way of tax planning and investments..
- All financial documents must be kept safely and keep family members informed of the same..
- Financial investments must be followed through personal financial advisor..
- Review your portfolio at every six months..
- Product Diversification is very important while investing . Simple Formula - (100 - your age can take risk).eg. if your age is 30. (100-30) - you can take risk upto 70% can invest in Equities ,Stock ,etc.
- Start Invest Early. If any senior Citizen , Kindly Forward the Thump Rule to all your friends, Family members, Childrens & advice / give Guidelines to start saving at earliest.
- These are general suggestions, personal Finance and investment decisions depends upon case to case basis.