Planning financial issues is not an easy task. Many people invest in a haphazard manner without a plan. Such random investments are not very useful. Centrik, tells you how to chalk out a financial plan that can help you reach your goals.
1. KNOW HOW MUCH YOU CAN INVEST
Find out how much is the investible surplus from your monthly income. Invest at least 10% of your income. Less than 10% means you aren’t saving enough.
Smart tip: Most people save what is left after expenses. Change this to spending what is left after investment.
2. IDENTIFY YOUR GOALS
Write down the objective why you are saving. Typical goals are retirement, children’s education and marriage, and buying assets such as house, car.
Segregate goals by tenure
Less than 3 years: Short term
4-7 years: Medium term
8-12 years: Long term
Over 12 years: Very long term
3. PRIORITISE THE GOALS
Decide the importance of goals, depending on importance, time horizon and financial impact on other goals. Critical goals like kid’s education and retirement are non-negotiable. But buying a car or house can be deferred or even dumped if necessary.
Smart tip: Ear-mark separate investments for each goal. This helps track progress for each goal.
4. CALCULATE FUTURE COSTS
Factor in inflation to know how much different goals will cost at a future date. If college fee is Rs. 6 lakh today, 8% inflation will double it to Rs. 12 lakh in nine years.
Smart tip: Assume average inflation of 7% for retirement needs but 10% for education costs.
5. CHOOSE INVESTMENT OPTION
Choices should depend on the time available for goal.
Tenure of goals defines the risk and the investment option
Smart tip: If KYC compliant, investing online is very easy for those with debit cards and net banking accounts. Most fund houses also offer eKYC facilities now.