Golden Steps for Personal Financial Planning

We all have an ambition to go higher up in the career and while doing so our Salary gets many fold Jumps and so do our Expenses owing to our Lavish Life style. Many a times we try to save the money but we have to remember a Simple rule saving and investing are 2 different things.

Make an Expense Sheet - Make a detailed Expense sheet and always discuss the same with your Family as well. Take the Minutest expense also in record. Add some 10-15% of the total amount as Contingency expenses as well.

Make an Investment Account Separately- Always maintain an Separate a/c for investment and if possible get the online excess to that account so that anytime you can login and check the amount of investment and get a hold of all money flowing in and out.

Never Keep Money Idle in Saving a/c- All money lying in the saving a/c get an annual interest of 4-5% but get depreciated @ 10-11% due to inflation. So avoid making money lying idle and let it earn for you.

Always Secure your Income- Calculate your Earning for Life simply by multiplying the current net take home salary/pm*12*no. of years in retirement. We can avoid the hikes in the salary as they can be adjusted with the Inflation and new liabilities arising in due course of time. Once you have accounted your total income capacity for life just take a Term Plan for your self for a Sum assured equal roughly to the total income capacity. Always go for a Non Return of Premium Plans (Strictly Avoid Return of Premium plans). Ensure to have a proper Medical check done and ensure that you fill the form yourself and always retain a Xerox copy of the filled form in the records.

Always Secure Contingency Health Expenses- Health Expenses rising heavily can any time make a heavy dent on our savings and investments (thanks to our Good Lifestyle as well). Always take a Health Plan from a Health Insurance company (Avoid TPA settlement companies).  Don’t go for any lucrative add-on’s as the sales people are bound to offer for selling a notorious plan. Just take a Plain Family Floater Health Insurance for your entire family. Avoid New companies and strictly avoid Companies having unstable back ground as they might sell off the business in future to some body else and transfer the liability.

Contribute to PPF- Save atleast 1 lac Rs per annum in PPF account. The Advantages being first in Fixed return category they are the ones giving the best return, their compounding factors are the best one. Lastly they make the amount secured as you can normally not with draw the money as and when you wish so the actual saving gets used only for the purpose for which it is invested. Preferable I would suggest that the PPF investment shall be linked to Higher education and marriage related expenses of your family. Always go in for a period of 15 yrs+.

SIP’s – Never forget to make the rest amount invested in to SIP’s. Form a Spread with approx 40% of the total amount getting invested into various sectors like Pharma , IT, Banking, Infra, Gold, Service Industries, Off Shore Funds and the rest into Diversified Equity Funds. Have some ideal mix of Debt and Equity Funds.

Keep Reviewing every 6 Months and Churn if required but be patient with your investments. Never take hasty decisions for your investment, Give the portfolio some time to mature.

Let your Money earn for you as well..

Keep Investing.. Cheers. VS