If you are new to financial planning, then this is the right time to begin! Applaud yourself for getting started! Now that you are here, let us start with the basics. Financial planning is a strategic, step-by-step, and definitive process of setting financial goals and achieving them for the purpose of wealth creation and future financial security. Let’s understand the top rules for financial planning that will help you to walk through this path with ease –
1.Money management
The first thing you need to be aware of, is your cash flow. It is a good idea to understand how much income you currently have and start saving. Saving money is an important first step in achieving financial goals and is the starting point of creating security.
2.Regulation of expenses
You need to have good planning and a fair idea of how much money you spend each month, so that there aren’t too many unplanned expenses. Control your cash flow and categorise your expenses into fixed and variable, i.e. necessities and luxuries.
3.Personal balance sheet
If you really want to get smart with financial planning, maintain a personal balance sheet about how much money you have and how much you owe. Make a note of your assets and liabilities.
4.Being wise about investing
If you want to know the biggest importance of investing, it is this- saving will manage your money but investing and more importantly knowing where to invest money is what will aid in actual wealth creation and create financial security in the true sense. Study the types of investment available and know all your investment options. For starters, Mutual fund investments are a good place to begin.
5.Creating investment portfolio
Do not keep all your eggs in one basket. Spread your investments in options such as debt, cash, and equity. Diversify the sums according to your investment goals. Do not forget to revisit and tweak your investment portfolio periodically.
6.Retirement planning
With increased life expectancy and medical inflation, one needs to secure their golden years- so it is never too early to begin planning for your retirement.
7.Debt management
If you have a lot of debt, start paying off the most expensive one. Lack of debt management can disrupt your financial goals completely, so make sure you don’t let that go out of control.
8.Risk coverage
Insurance is a big part of financial planning as life and property are vulnerable to risks. Covering all those risks is crucial for wealth preservation. Get adequate life, term, health, and vehicle insurance as per your personal requirements.
9.Estate planning
Every asset is a part of your personal estate, whether it is your home, car, or cash in your bank account. As soon as you start accumulating assets, you can start planning your estate and decide what happens to them after you pass away.
10.Tax planning
Analyse your finances from a tax efficiency perspective and plan your taxes accordingly. Make use of tax saving options to achieve your short-term and long-term financial goals.
So these are the top 10 golden rules of financial planning. Planning your finances can sound overwhelming at first but these tips will make it easier for sure. Financial planning will ensure that you make good use of your investments. Happy investing!
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Reference link -https://cleartax.in/s/beginners-financial-planning
