Financial Planning Tips
Unfortunately, finance training is not a part of compulsory education, and we end up having trained professionals who are lost when it comes to investing their hard earned money. While they may be doing very well in their respective fields, their funds lie idle in the bank for want of better direction. Such idle funds are actually depreciating fast. Financial Planning for oneself is the responsibility of every earning adult and it is a daunting task for most. Let us look at the most basic steps to help the investor make sound plans for the future.
The first step involves setting yourself goals. One has to take into account lifestyle choices as well as contingencies to arrive upon goals. But once this crucial step is done, it shows the investor the kind of money that will be required to meet these future needs. This helps in reducing impulse spending and ensures that money is saved towards the goals on a regular basis.
Next, it is important to create a contingency fund. No matter how well you think you are doing at any given point in time, one needs to be aware that a stumble could happen at any time. All investors need to put away at least 6 months worth of expenses into a secure investment avenue which will be available to them without delay. This gives the investor the peace of mind required to then invest in more risky options knowing that he has a safety net to fall back on.
While having goals is crucial, it is equally important to set timelines to these goals. While a child's education can seem like a distant goal when one has a baby, the reality is that the goal looms for the parents when the first few years go by. Making timelines gives a clear picture for the goal and the time left to achieve it.
One of the goals you set should be to pay yourself first, ensuring enough savings for retirement. While the demands on the income earned are multiple at any given time, it is important to remember to pay your future self first before considering any lavish expenses or extravagances.
Lastly, remember to bifurcate your assets – never put all eggs in one basket. An investor needs to make sure he has exposure to as many asset classes as is possible. Equity, debt, real estate and gold all should be a part of the investment bundle for an investor. This will safeguard the assets against the possible loss made in any particular asset class. When an investor follows these cardinal rules of investing, he can rest assured that all his responsibilities will be taken care of.
The first step involves setting yourself goals. One has to take into account lifestyle choices as well as contingencies to arrive upon goals. But once this crucial step is done, it shows the investor the kind of money that will be required to meet these future needs. This helps in reducing impulse spending and ensures that money is saved towards the goals on a regular basis.
Next, it is important to create a contingency fund. No matter how well you think you are doing at any given point in time, one needs to be aware that a stumble could happen at any time. All investors need to put away at least 6 months worth of expenses into a secure investment avenue which will be available to them without delay. This gives the investor the peace of mind required to then invest in more risky options knowing that he has a safety net to fall back on.
While having goals is crucial, it is equally important to set timelines to these goals. While a child's education can seem like a distant goal when one has a baby, the reality is that the goal looms for the parents when the first few years go by. Making timelines gives a clear picture for the goal and the time left to achieve it.
One of the goals you set should be to pay yourself first, ensuring enough savings for retirement. While the demands on the income earned are multiple at any given time, it is important to remember to pay your future self first before considering any lavish expenses or extravagances.
Lastly, remember to bifurcate your assets – never put all eggs in one basket. An investor needs to make sure he has exposure to as many asset classes as is possible. Equity, debt, real estate and gold all should be a part of the investment bundle for an investor. This will safeguard the assets against the possible loss made in any particular asset class. When an investor follows these cardinal rules of investing, he can rest assured that all his responsibilities will be taken care of.