Read about how planning the right roadmap for your financials can help you build a life of financial security and freedom.
Have you ever wondered how some people seem sorted in their mid-40s? How do they take two vacations per year? Or buy the swanky car they’ve always dreamt of?
From picking the right life insurance plan to building a secure retirement fund, financial planning answers all the unforeseen obstacles life throws at you.
As young adults, we’re so busy juggling the different aspects of adulthood that we often forget the importance of financial planning. Imagine not having to feel overwhelmed in such situations!
By acquainting yourself with the various aspects of financial planning, you can split your investments to take care of emergencies or any other unavoidable commitments.
Taking the first step is challenging
Surprisingly, only a tiny fraction of the Indian population has adapted to the newer modes of investing. Most of them are still stuck to the traditional ways of saving our money through FDs, investing in commodities such as gold, etc. It’s not wrong, but it’s certainly not the smartest way!
Getting yourself financially educated is essential if you want to work smart instead of only working hard.
We have so many “valid” excuses: working late, hosting your friends, a trip to Goa for your friend’s bachelor party, etc. What about the investments we should be making? Or buying your dream home without having to sacrifice other things.
It might sound overwhelming and time-consuming, but it doesn’t have to be! You can make your money work for you with some time and guidance. The sooner you begin, the better for you.
Prioritising your spending can enable you to monitor your cash flow, reduce wasteful spending, and ultimately increase your overall capital. Just ensure that you don’t keep spending money on useless items that could lead to you facing a financial crisis.
The aspects to focus on for effective financial planning
Step 1: Budget your expenses and prioritise
The first step to sorting out your future is budgeting your expenses and prioritising your money over everything else. After every month, note all the purchases you’ve been making, mark the ones you feel are excessive and eat into your budget a lot.
Prioritise the main purchases or expenses of the month - your rent, fuel, food, and travel. Make sure you’re not compromising on these aspects because they are your necessities, and you’ll always have to spend on them every month.
This way, you’ll be able to learn one of the most important financial lessons - a good budget is the best way never to go broke!
Step 2: Develop your assets
The next step in effective financial planning is developing your assets, so they can give you the returns you seek. This means investing in money-making schemes and plans that promise to provide you with a secure financial future.
One of the best ways to develop your assets is by investing in future-proof plans such as SIPs and Fixed Deposits/Recurring Deposits. These asset management vehicles will give your money steady growth over the years without risk. If you can invest a small portion of your money into these options, you’re sure to secure yourself in any emergency.
You can also invest in good insurance with a decent premium so that you or your family members are well taken care of in the event of any mishap.
Step 3: Make your money grow
Another critical step in your journey towards achieving your financial goals is making your money grow exponentially over time. This requires a little effort from your end in understanding the stock market and how mutual funds work. The mutual fund option is one of the best ways to invest money and see it return excellent growth percentages.
Mutual funds, however, as their ads say, are subject to market risks. It depends on many factors that sometimes aren’t possible to predict. But, with time and consistency, you can learn how to read the market better, invest in funds that aren’t as risky, and see your money grow by a large amount within a shorter period than FDs and RDs.
The money invested compounds which means that the interest is added to the base amount every year to calculate your net profit. With time, the amounts compounded keep growing, and your money keeps increasing exponentially!
You could also invest in real estate or gold as these are constantly appreciating assets and will give you great returns over time. Just make sure to do your research before investing.
Planning for early retirement
Planning for early retirement is always a good idea. If you have a smart savings plan, then by the time you’re even 40-45, you’ll have enough in the bank to live a comfortable life. You must consider the various factors in investing money in slightly risky options like mutual funds.
Starting the good habit of saving in your 20s can ensure you’re well sorted and set in your 40s and beyond. It’s the best retirement plan to give yourself so that you’re never worried about the future.
Staying untouched by inflation
Inflation has been identified as the greatest destroyer of purchasing power. Over the last few decades, the value of the Indian rupee has fallen precipitously, and it is only predicted to worsen. As a result, it is critical to organise your finances for a brighter and more secure future.
If you plan, you will be better prepared to deal with growing inflation in the coming years. Always have a financial goal to start with at the beginning of each year and ensure that it has monthly or even quarterly targets.
These targets become easier to hit with time because you would have cultivated the good habit of saving money in a much better fashion.
Keep long-term goals in mind
You can achieve your long-term goals if you’re consistent, and with the help of the right company, financial planning in India won’t be a burden but a blessing for you and your family!
Financial planning is a method for achieving your life goals through careful financial management.
You should choose a financial advisor carefully who can comprehend your needs and create a strategy that will take you from your professional career to retirement. Furthermore, the sooner you begin, the better.
By carefully analysing your spending habits and budgeting, you can readily find activities or obligations that require more attention. Such expenditure prioritisation will greatly assist you in monitoring your cash flow, cutting unnecessary expenses, and eventually building up your overall capital.
To wrap up
Never underestimate good financial planning because it can go a long way in helping you better yourself and your family. Keep an eye out for the trends in the market, be wary of inflation rates and continue investing smartly.
Within no time, you’d have built a small fortune with which you can secure yourself for decades! Life is a marathon, and only those who can stay ahead of the curve at least five years in advance are guaranteed to live comfortably!