Financial planning is an important aspect of life. It helps us plan our finances so we can achieve our goals. But many people don’t know where to start when it comes to financial planning. In this article, I’ll share my top ten tips on how to start building a solid financial foundation.
Financial planning is something every individual requires. It helps you plan your finances so that you can achieve your goals. But many people aren’t aware of where to begin when it comes to it.
Here are the best 10 financial planning tips for salaried persons. It may be applied to people who have other sources of income too.
|10 Financial Planning Tips for Salaried Employees.|
|1. Start Saving Early.|
|2. Set Goals.|
|3. Pay Yourself First.|
|4. Save at Least 15% of Your Income.|
|5. Invest Regularly.|
|6. Enroll in Health Insurance Policy.|
|7. Get A Good Life Insurance Policy.|
|8. Get Home Loan As Early As Possible.|
|9. Pay Off Your Debts.|
|10. Give A thought And Do a Background Check.|
1. Start Saving Early.
One of the first things you should do is start saving early. This will help you avoid having to make drastic changes later in life. Starting to save money at an early age is the key to financial stability. There’s a huge gap between the returns of the invested principal. Investing at an early age would give you a much better return than investing in old age.
Moreover, the pricing of any investment portfolio is cheaper when you are young. Needless to mention that when you start early, you might have the benefit of taking risks.
As per data provided by reliable sources such as SBI Mutual Funds, HDFC Mutual Funds, and Axis Mutual Funds. A person who starts investing in SIP at the age of 20 years has much better opportunities than a person who starts at the later age of 35 years.
Short-term as well as long-term goals can be set and achieved if chosen correctly with advice from a financial advisor.
2. Set Goals.
Once you’ve started saving, you’ll want to set some goals. You might want to save up enough money to buy a house, pay off student loans, or even retire. Whatever your goal is, write it down and keep track of your progress.
Sometimes, it’s frustrating when unavoidable circumstances arise and let you derail from your goals. Nevertheless, financial planning is all about it. When planning you need to include these unforeseen scenarios too.
That’s how you overcome the situation and also lets you continue toward your goal without any hindrance.
Set goals which you can achieve. Set one goal at a time, and work toward achieving it. When you do that, you might be able to accomplish your desired result. Then, go for the next goal and so on.
3. Pay Yourself First.
This tip will help you build a strong financial foundation. If you’re not paying yourself first, then you won’t have any money left over to put towards other things. Start by setting aside 20 to 30 percent of your income per month into a savings account.
That’s your personal money which by any means you have to invest to get better returns. If you can, keep on increasing the saving percentage of income.
When you pay yourself, then start managing other expenses. With proper budgeting, you might be able to get some reserve out of it too.
4. Save at Least 15% of Your Income.
Once you’ve reached your goal, you should save at least 15 percent of your income. That’s because saving money gives you more freedom to spend on what matters most to you. You can use the extra money to pay off debt, invest in your future, or even donate to charity.
5. Invest Regularly.
Start by setting up automatic transfers into your savings account each month. Then, set aside some money every week to put toward your retirement fund.
If you’re not sure how much you need to save, consider using online calculators to help determine how much you should contribute to your monthly or weekly savings fund.
Some of the few effective monthly savings plans are Systematic Investment Plans of Mutual Funds, bank Recurring Deposits and of course Piggy Banks.
6. Enroll in Health Insurance Policy.
Having a good health policy will add value to your savings. Uncertainty is the only certain thing that exists in our lives.
Today you are feeling great in every aspect, but tomorrow may be your worst day. When we do not have any contingency plans for these uncertainties in our lives, then we might end up losing all our savings.
Health Policies are such contingent plans that enable you to protect your investment and savings.
The positive side of these financial products is that you may get an array of choices that you can customise as per your requirement.
The Artificial Intelligence(AI) of popular insurance companies such as SBI General may assist you with their AI to let you choose the best Health Insurance Plan.
7. Get A Good Life Insurance Policy.
Yes, life Insurance policies, what are these for? Do you need to register a policy in your name? Life Insurance is something that gives you peace of mind. Knowing your family will be secure after your demise is a sense of satisfaction.
You spend a fixed amount every year as a premium toward an Insurance policy, the Insurance company will ensure your life. If something happens to you, your family will get the money.
A policy may run for a few years to a lifetime. Money-back plans give you a death benefit and when the policy period is over you may get the fund with a bonus.
There are policies that give guaranteed returns. The best part of it is, one- you get your life covered. This means if anything happens to you, your family will reap the benefits. And second, you get guaranteed returns when the policy matures. The rate of return might be a bit better than its counterpart bank fixed deposit, but you are getting a guaranteed return with tax benefits.
Life Insurance policies will add value to your savings by means of securing your life.
8. Get Home Loan As Early As Possible.
Buying a decent home is a dream for everyone. When we do, we have this feeling of happiness that nothing can compare to. A sense of satisfaction and it feels like you have been reborn.
But, why it is better to buy a home at an early age? Everyone is not lucky to buy a home at the perfect time. Some of us do it quite late and others do it at an early age. If you are purchasing a house with a bank home loan, here are the benefits of buying a house at the early age
- You may get a better offer when you are young.
- The loan-eligible amount will be higher.
- You will get a maximum loan tenor which means your EMI will be less.
- You may get a chance to buy an additional home later on.
- Home insurance may be cheaper for you compared to the one who avails home loan at a later age.
- Start early so that you can end early. A home loan is a long-term commitment and you do not want it to go beyond your age of 60. Starting at the right time may give you more control over your assets.
- The interest that you pay on this loan will be huge. Just for instance, if you get a loan of 50 lakhs for 20 years, you might end up paying 1 crore to the bank. The amount is not indicated but it’s somewhat like that.
- This interest amount that you are going to pay has to compensate with something to save your future income. And that can be done only through good investments. Even if you have a very good business that generates profits, you can not avoid or neglect these interest pay-out on your housing loans.
9. Pay Off Your Debts.
Keeping any kind of debt in your account is not going to help you reach your goal. Debts may be any amount you are due to pay with interest.
You may be having loans from the bank, which bank charges you interest on the loan amount. You may have advances taken from private lenders or friends, which expect you to return them with some incentives.
As long as you have these obligations, you may have a hard time accumulating your own funds. Go for financial planning about the liquidation of these debts and pay it up at your best level.
10. Give A thought And Do a Background Check.
Giving thought to whatever you are going to do will give you better results. There are a whole lot of choices you have. Banks and agency banking may show you their multiple products to sell and offer, but it often comes with the “Terms & Conditions”, which is a very important part of product sale.
For both parties, it’s important and you have to know meticulously the actual thing behind a product that you buy.
Background checking is required. Since it would establish the genuineness of the financial products that you are buying. Remember, you are doing it for your future. So, researching before committing to anything makes sense.