Hello Friends. We all know that a proper financial plan is needed, to reach your goals. You need to know, that after 20 years, how much money do you need? How much insurance do you need? From today, you have to do saving and invest. According to that, have to get investment policies and Insurance plan your retirement planning. But when I was saying this, you got worried, right? Most of the people don't do good financial planning. Because it seems very complex, like too much paperwork, time, and complexity are involved, so we think, let things be as they are. we'll just do a SIP in a mutual fund and an FD in a bank. Because of this, you lose a very big wealth-creating opportunity. So today, I will make financial planning very easy for you. Just by giving a few minutes a month, you can do your financial planning and fulfill all of your dreams. Today I am going to tell you 5 simple steps for financial planning, which you can do yourself to complete all of your goals.
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| 5 steps simple financial planning. |
5 steps Simple Financial Plan
Let's start today's 5 steps of simple financial planning. If your financial planner gives you too much insurance, too many mutual funds, or too many retirement plans, suggesting all this, then you can tell they are not giving a good financial plan. The first quality of a good financial plan is that it's simple. So what are these 5 steps? The 5 steps are 1. Savings, 2. Loans, 3. Insurance, 4. Investment plan, and 5. Retirement plan. So we will discuss all these 5 points, and at the end of this post, you'll find out how your financial plan is going to be. Let's start...
1. Savings
You have to remember one rule: the monthly expenses at your home. Let's assume your home runs on Rs 30,000 per month, where kids' monthly fees, rations, and everything else get paid. So you have to keep at least this much safe in your savings account for 6 months so your house can run. So if your monthly expenses are Rs-25,000, then you have to keep Rs-1,50,000 on your savings account. If something happens tomorrow and you lose your job, then you'll have an opportunity to find a new job. So a 6-month emergency fund, which will be in your savings account. So that is savings, the money you have to keep in your savings account.
2. Loans
Where you pay too much interest. Two types of loans are there, good loans and bad loans. Which are good loans? Housing loans are good because they're very cheap, around 8% to 8.5%, and have tax benefits, so don't rush to prepay them. If you have a personal loan, where you are paying 12%-14% and also investing in mutual funds, which gives you 14%-15% return instead of investing in mutual funds, it's better to gather all the money and end this load, where you are paying 13%-14%. So the second step is to end all the bad, high-interest loans before starting an investment; your focus should be on ending all the loans where you are paying interest of 12% or more. This is the second step, stopping all the expensive EMI.
3. Insurance
This step scares many people. Keep insurance very simple. The first thing is life insurance; second is medical insurance. Life insurance for the earning members of the house if only you earn and no one else does. What are your yearly earnings? If your yearly earnings are Rs-400,000, then you have to take life insurance of 20x times that money. It means Rs-400,000 x 20, which is Rs-8,000,000. You have to take Rs 8,000,000. Basic life cover also; you can take critical illness cover with that. And you don't need any other insurance if you have children who do not earn; then they don't need life insurance for them. If you have non-earning members, don't take insurance for them. It's very cheap that way. If you are roughly around 30-35 years old, then the yearly premium will be around Rs 10,000-11,000.Less than Rs 1,000 a month, and you'll get life coverage of Rs 1 crore. So now your life insurance problem is solved.
Now, let's come to health insurance. Everyone at home should have health insurance. You, your spouse, kids, parents, and everyone should have health insurance.At least Rs-150,000 to Rs-200,000 for everyone. If anything happens to anyone, then Rs-150,000 - Rs-200,000 is the bill that it becomes. So, per person should have around Rs-200,000 of life insurance; it can be less if you can't afford it now. Better than not taking insurance, take Rs 100,000 at least. By doing this, you get life insurance, critical illness insurance, and health insurance. So your insurance needs are over. Now you'll think it's not that difficult but easy.
4. Investment
So what are the investment options? You can invest in equity; you can choose stocks or mutual funds. After that, it's important to diversify into gold; besides that, there is real estate. So let's talk about them one by one. Equity, including equity stocks and mutual funds. My personal advice for most people is, if your retirement is far away, And your goals are also far away if there's time for a kid's marriage and time for their education expenses, so you must get a little exposure to stocks.
How much to take and in which stocks, you can consult it with any financial planner. These types of financial planning services, where we do your risk profiling, determine how much money you should invest and in which stocks and mutual funds. And I understand that some people are not confident about stocks; they don't want to pick themselves or take anyone's advice. In that case, you must invest in mutual funds.
One rule here is, as you are earning around Rs 50,000 a month, at least 20% of it, which is Rs 10,000, must be put into some investment instrument. Which are gold, real estate, mutual funds, or stocks? If you earn Rs-50,000 a month, then you must invest Rs-10,000 in these four combinations; if more, then it's much better. If you want to invest in stocks by someone's advice, then it's very good. If not, then you should definitely invest in mutual funds; they're an asset class which will give more returns than gold and real estate and be more tax-friendly.
So mutual funds are a must for everyone; if stocks, then it's much better. Second comes gold; everyone should invest in gold, and the best way is not by buying gold jewellery. It takes making changes, and when it's melted, there are deductions. Many more complications and returns are not good. If you are taking gold for investment, then the best way is the Sovereign Gold Bond. Whereas the gold price appreciates, you'll get that return, and you will also get 2.5% fixed annual return. This Sovereign Gold Bond, according to us, everyone must take. So your gold investment is done through a sovereign gold bond.
After this comes real estate. Indian people love gold and real estate, but according to me, real estate is not as good of an investment as it sounds. It sounds good because we take it and leave it for years. We're in stocks and mutual funds; we make changes every year. So returns don't gather, and the compound doesn't happen. We've been in real estate for 20 years; that's why returns are good. So I think you should at least take one house in real estate.
When you take your first house with a home loan, then you get many deductions. Home loans are very cheap. They are almost negative in cost; if you adjust it with inflation, then the interest rates are almost negative after tax deductions. Everyone must take one house for their living, and you can take it with a home loan. If you have a business and you need a permanent shop or office, you can take an office for your business and profession. Besides that, real estate for investment purposes, I don't like. First paperwork headache: wealth tax, property tax headache, fear of being captured, maintenance, moving and sending tenant and headache of doing repairs for them. If you count them, the returns on real estate are not good. If you do full-time real estate, then that's another thing; then you will make a good profit. But if you bought one or two houses, put them up for rent, occasionally bought them, and then sold them, you will not make money that way, so don't go into that mess. Real estate for an office and your living is good but not good for investment. So now your investment plan is cleared.
But there's one doubt: how much do you spend on stocks, how much on mutual funds, and how much on gold? This depends on your individual goal, aim, and needs. If I give a thumb rule, that won't be right because we say this after we do risk profiling of everyone, but between these three, it's important to have some allocations. Take 3 mutual funds and take a sovereign gold bond. How much can you do? That I leave to you, because I cannot give any rules of thumb. So this is your investment plan: simple. If you do stocks, then good; if you don't, then 3-4 mutual funds, sovereign gold bonds and a home for your living with a home loan.
5. Retirement Planning
After this comes the last thing, which is retirement planning. So retirement planning is very simple; you just look at your today's expenses. So think, there are 15 years left in your retirement, so from today put that much money in NPS so that you get Rs 55,000 after retirement. So you just have to open an SPI calculator; you can open it on Google. There you see how much you will invest from this month, and that will increase by 10-11%, whose NPS return gives around 10-12%; you take around 10 or 11. So you invest that much money, which will increase by 10-11% after 60 years, with an annuity plan; if you take the annuity plan for that money, you will start to get Rs 55,000.
If you do all this, then your 5-step financial plan is over. And you secured your life. So this is that simple: don't bring that many complications; you must keep instruments as small as possible and make less paperwork. If something happens to you, then your family can keep and understand those papers, and you take advantages of the insurance. It's important to keep things simple.
A good financial plan is one that is simple. Now your planning is complete. You took 3-4 mutual funds and 1-2 tax-saving funds; you took a Sovereign Gold Bond, NPS, one health insurance, and one life insurance and kept six months' worth of equal money in a savings account where you can get FD-like returns in emergency funds. If you have done all these, then your financial plan is complete, and it's that simple.
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