Money is a limited resource, which is why financial planning is of utmost importance. The sum total of our needs and desires is always greater than the money we earn, which is why we have to choose wisely and set our priorities accordingly. Financial planning is not only about reducing your expenses and increasing your savings, but it’s also about finding the right avenues to grow your money. While the former can be achieved through budgetary controls, the latter will require you to allocate some time towards investment planning. This is where you think about putting your money in investment options such as stocks, mutual funds, real estate, gold, etc. Buying insurance is also a wise decision, as it safeguards the financial future of your loved ones.
When to start financial planning?
For most of us, financial planning begins when we start earning on our own. However, if you have taken a loan for higher studies, your financial planning will begin a bit earlier. As a child/student, our financial needs are met by our parents, but when we start earning, we become financially independent. This is an important milestone in the journey of life. This stage of life also brings various responsibilities, one of which is to effectively manage our finances. In case of adults, borrowing from family orfriends is usually frowned upon, which is why you need to start financial planning as soon as you start generating your own income. Investment planning will be the next stage in the process, when your core needs and other goals have been met and you have managed to save some money.
Financial planning is a lifelong process
Another important thing to understand is that financial planning is not something you do once and forget about it. Financial and investment planning will continue throughout your life, right from the time you start earning to the time you retire and beyond. You may also have to make changes to your financial planning at every stage in accordance with your emerging needs, life goals and risk capacity.At different stages of life, you will need to consideravailable options such as investments, life insurance, term insurance, ULIPs, child education plan, health insurance, retirement plan, etc.
Stages of financial planning
- Emergency fund: Once your basic needs and goals have been met, you need to create an emergency fund. This amount should be enough to take care of your financial needs for 6-8 months. You can keep the emergency fund in your savings account or invest in a debt fund, where it will be safe and readily accessible. You may need this fund for emergency situations such as job loss, accidents, etc.
- Pay off your debts: In the next step, you need to pay off your debts. Most loans have high-interest rates that can be a drag on your finances. Before you start investment planning, you should pay off your high-interest debts.
- Investment planning: After creating an emergency fund and paying off your debts, you can begin your investment planning. This stage will require you to carefully choose from available investment options such as stocks, bonds, mutual funds, real estate, gold, etc. If you are young, you can go for high-risk, high-return options such as stocks. If you are in your 30s or 40s, you can consider safer options such as mutual funds, bonds, etc.
Financial planning tips
- Think before spending: You should try to spend less than you earn. This may seem obvious, but still many people fail to achieve this basic financial goal. You may be eligible for various loans, but avoid the temptation unless it’s an emergency.
- Create a budget and follow it: Create a budget that has all your income and expenses. The budget will help you save money and you will know how much you have every month for your expenses. At the end of the month, you can compare the actual and budgeted amounts to understand your progress.
- Buy insurance: Life can be unpredictable, so it makes sense to secure the financial future of your loved ones. You can do this by buying insurance such as health insurance, life insurance, etc.
- Write a will: A will canbenefityour loved ones. If you have not already created a will, it’s time to write one.
The thing about financial planning is that the sooner you start, the better it will be for your future. Planning your finances at a young age will ensure that you have adequate time to achieve your financial and life goals. You will also be able to provide for the needs of your family members and secure their financial future. Overall, financial planning is crucial to unlocking a lifetime of peace, prosperity and happiness.
About Aegon Life:
Aegon Life Insurance Company Limited launched its pan-India operations in July 2008 with a vision to be the most recommended new age life insurance Company. The fulfilment of this vision is based on having a complete product suite, superior technology, providing customized advice and enhancing the overall customer experience. This joint venture adopts a local approach with the power of global expertise to facilitate a direct to customer approach, leveraging digital platforms to bring transparent solutions to customers and to prioritize their needs. Aegon is one of the world’s leading financial services organizations, providing life insurance, pensions and asset management and Bennett, Coleman & Company, India’s leading media conglomerate, have come together to launch Aegon Life Insurance.