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What is Financial planning?
Financial planning is necessary to ensure peace of mind and secure your future. It involves chalking out a plan listing all your future goals and estimating the capital required for their completion. You then plan out the financial means to attain them. It may involve saving, investment, and administration of funds, among others.
There are many things that go into making financial planning successful. Some of these are-
1.Start saving
As they say ‘A penny saved is a penny earned’; this cannot be truer. Saving money is one of the most important habits that you can inculcate in yourself. With age, your responsibilities increase. Along with your future goals, there can be other developments which might require you to spend money. Hence saving money is very important. Experts recommend saving 5-10% of your salary every month.
2. Invest in market funds
It isn’t worth to let money lie stagnant in your bank account. Though you earn interest on your savings, you can make your money work for you. Consider investing in the various market funds. You can choose from a variety of debt or equity-based market funds. The debt-based market funds offer less returns, but are safer for you, as they do not entail a heavy loss in case of a market downturn. Equity-based market funds are riskier and are meant for the young and the ambitious. They offer more returns as compared to debt-based funds but carry more risk in case the market does not perform. Make sure to balance out your investment portfolio with both types of funds to mitigate the risks and maximise the returns. A financial planner can help with your investment planning and make it more effective.
3. Plan your retirement
Planning your retirement is an integral part of financial planning. When you retire, there will be no regular income to fall back on. As a result, medical expenses, daily needs and other responsibilities are bound to make a dent in your savings. A robust retirement plan can help you prepare better for life after retirement. A retirement plan gives out periodic payouts that can act as retirement income to substitute for the loss of income when you are retired. This can help you with meeting your daily expenses and make this phase of life more comfortable for you.
4. Opt for an insurance
A term life insurance, life insurance, and health insurance are essential to financial planning. Insurance can help you protect yourself against any eventuality.
Experts suggest starting with term insurance. Term insurance offers protection for a limited period but is cheap and offers significant payout. This policy is suitable for those who are new to life insurance or have to cover short term goals like a child’s marriage or education.
Life insurance is a must-have. In case something happens to you, your family will be under a lot of emotional stress. In case of any unfulfilled debts or liabilities, the financial strain would further add to it. As a result, it is advisable to purchase life insurance to secure your family’s future even in your absence. Health insurance- You cannot predict when you might fall ill and require hospitalisation and treatment. To prepare financially for any such eventuality, it is advisable to get yourself a health insurance policy.
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