It’s that time of year when you are done planning your taxes and filing your returns for 2018/19. That said, does your financial journey end here? The answer is no. Financial planning is an ongoing process and tax planning is a small, but integral part of it. To reach your future goals effectively, you need to have a well-defined financial plan in place. This financial year 2019/20, focus on the following four key elements of the financial planning process to help you manage your hard-earned money that much more effectively:
Analyse your financial situation
Evaluating your current financial situation holds the key to ensure how well you are progressing in terms of achieving your goals. This is where you have a closer look at all the key areas of your financial life. You need to check whether your protection or insurance cover is good enough to take care of your family’s needs in case of a tragic event. Further, this is a good time to see if your current financial situation is good enough to help you work towards achieving your long-term goals such as buying your own home in the long run. If you feel your current income is not good enough to help you build a corpus for achieving your long-term goals such as retirement funds and children’s education marriage, you can plan towards adding more income options. This is where financial situation analysis can make a telling difference.
Identify your financial goals
Most of you have loads of goals, but it is crucial to pick your important ones. Retrospection is a good way forward and will help you identify what your key goals are, and what you need to achieve them. Inflation will always be growing and your investments need to grow at a rate higher than that of the inflation to help you achieve your financial goals. Thus, it is crucial for you to start your financial planning today, to enable you to achieve your financial goals for tomorrow.
Work towards taking action and monitoring
Identifying your goals is one thing, but taking timely actions to ensure achieve them is another. Do a gap analysis to find out where you are in terms of your investment actions and where you need to be. Next, just fill in the gaps where ever you can to achieve your future goals. These could include actions such as increasing your life insurance cover, plan an additional SIP, open more bank FDs, investing in IPOs, CFDs, NCDs, ELSS, and other similar actions to help you achieve your financial goals.
However, is just taking actions enough? The answer is no. You need to ensure that you monitor your investment plans regularly. For instance, one SIP of Rs.2500 may not be enough for you and your wife, especially If you are planning to have children. In that case, you may have to start another SIP of Rs.5000. Likewise, you might have to increase your insurance cover.
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