When you sum up a financial plan, you must follow these steps to progress systematically.
Step 1: In the first phase, you must pen down all the desirable feats and set a target duration against each. Considering your present income and future promotional prospects, these aspirations must be practical, measurable and reachable.
Step 2: Next, you should conduct budgeting to regulate cost allocations to various segments. Proper money management will allow you to cut expenses by judging monthly income without compromising your lifestyle.
Step 3: Then concentrate on areas where there is an opportunity to reduce taxable income. Invest in long-term equity funds to avoid tax implications levied on short-term capital gains. Moreover, staying invested for long in companies offering dividends will be a wise option apart from choosing tax-efficient investments like NPS, PPF, etc.
Step 4: Create a liquid emergency fund to assure a smooth cash flow for 5-6 months. The purpose is to consolidate financial stability if you run out of income. Regardless of the types of financial planning you incorporate into your daily life, you cannot go wrong on this part.
Aside from savings accounts, you may also choose liquid funds to accumulate this corpus. Finally, refrain from selling off the funds in a rush or utilising this money for casual spending.
Step 5: Avoid taking multiple loans simultaneously. It will hinder the savings process and lead to wrong investment plans as you will aim to generate faster returns. Therefore credit control is an important step in effective financial planning.
Step 6: Purchasing insurance plans to protect your assets is something you must pay attention to. Besides consolidating estate planning, buy a term plan to ensure an income alternative for your loved ones. Otherwise, your family members may become financially stressed when you are not around anymore.
Step 7: Start saving early for your child's future. Long-term financial commitments bring the compounding factor –the key element behind wealth creation. Research profitable SIPs, consult with financial advisors and begin your investment journey on a confident note.
Finally, it is important to stay active in your ventures to ensure the financial planning stays on track. If you do not monitor the budget over time, things will become complicated. Hence we suggest you learn about these types of financial planning and implement them to secure your future.