Financial planning or financial management is a step-by-step strategy that helps individuals/entities achieve their goals and effectively mitigate crises. It helps to track income, expenses, savings, and investments and thus keeps an eye on all these to smoothen one’s finances.
Financial planning is a holistic approach to managing the present and the future of your finances. It acts as a guide and thus helps in achieving goals and preparing for financial demands. Whether it’s your first home, parenting, or post-retirement corpus, a disciplined investment routine can help you accomplish it all.
“When you start your investment process, you have to start with risk management. Risk management involves three aspects – the first is life insurance, the second is health insurance and the third is the creation of ‘an emergency fund,’ said Hemant Rustagi, CEO of Wiseinvest, explaining the Dos.
Rustagi said the purpose of investing is to fulfill the dreams one has for oneself or one’s family.
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To do financial management
1. Life insurance: Life is uncertain and as long as an individual plans for the well-being of their family, and in case something happens to that individual, those aspirations and dreams cannot be realized. At this point, life insurance comes into play and helps by providing financial support, Rustagi said. Life insurance is a risk management tool.
2. Health insurance: “Our way of life has become so expensive today that if someone spends five days in the hospital, their budget for the next one or two years will go haywire. So it is important to have health insurance to fund your medical bills,” Rustagi said.
3. Emergency fund: Experts say that if a person does not have an emergency fund, he may continue to disrupt his investment fund from time to time.
Rustagi says having the right product is just as important. “For life insurance, take a term plan and for health insurance, if you have a small family, take a family float and invest in a liquid fund to create an emergency fund and keep it in some form purely liquid,” Rustagi said.
He said that one should always follow an investment strategy based on goals, whether short-term, medium-term or long-term.
4. Asset Allocation“The most important aspect of money management is asset allocation. Keep in mind the purpose of investing in equity for retirement planning and raising children. , this money can be invested in equity. If it is a short-term goal such as holidays or school fees, this money should be invested in safer instruments. In the medium term, the investment can be made in the form of equity and debt,” Rustagi said.
5. Save first, spend later: The financial adviser said to avoid spending first. “You have to save first and then spend. People have to commit to their investment goals and first withdraw money from their income for that purpose,” he said.
6. Start investing early: According to the expert, when you are young, you can take a risk. “When you are young, you can afford to make mistakes because time is on your side. So you can invest in stocks and take risks because it helps fight inflation in the long run. equity investing is the power of compound interest,” says Rustagi.
Financial Planning Don’ts
1. Never confuse saving with investing: Rustagi says never equate saving in banking with investing. “Many people think that saving and investing are the same thing, but that is not the case. While the purpose of investing and saving is to secure the future and maintain the discipline, the two are completely different. In the process of creating wealth, saving is the first step but it is investment that will help create wealth,” he said.
2. Don’t rely on traditional options: Investors should not rely solely on traditional investment options such as fixed deposits. “We face two risks: capital risk and inflation risk. We all focus on capital risk because we don’t want to lose any part of our investment. And in the process, we ignore risk. much higher inflation because in the long term if one continues to invest in traditional options the returns will be low and taxable in most cases so one will not get a positive rate of return given inflation and taxation,” Rustagi said.
3. Avoid wallet fuss: Rustagi suggests investors not make frequent changes to their portfolios. “While monitoring is important, it shouldn’t be done just for the purpose of making changes to the portfolio. If you keep changing your asset allocation, you will lose many opportunities in the market,” he said. -he declares.