Financial planning is the process that provides you with a framework to achieve your life goals in a systematic and planned manner, avoiding shocks and surprises. It includes goals such as determining capital requirements, setting financial policies and ensuring that scarce financial resources are used in the best possible way.
How you deal with excess cash determines your future. If you don’t have a plan, you’re probably going to overspend. If you don’t have a plan, you’re probably going to overspend. This money could have been used to make it financially independent. In the context of inflation, everything becomes more expensive every year. If you don’t invest, your money won’t grow to fill the inflation gap. Otherwise, you may not be able to retire the way you want.
Investing can be a great way to channel extra money and offset inflation. It can be used to increase wealth and redirect it to achieve goals. The earlier you start investing, the better. Investing can be a bridge between where you are and where you want to be. Start by identifying goals like buying a car or planning for retirement. Categorize these goals into short-term and long-term. Goals that can be achieved within 1-3 years are essentially short-term. The goals that require a horizon of 35 years are referred to as medium-term goals that take more than 5 years to reach our long-term goals.
Once you have identified your goals and risk appetite, you can choose the appropriate investment haven. A risk seeker can opt for a diversified equity fund. A risk-averse short-term investor, on the other hand, can opt for a liquid fund or a mixed fund. Investment funds have developed into the most diverse investment paradise. You can start the Systematic Investment Plan (SIP) with a nominal sum of Rs 500 per month. With SIP, a fixed amount is withdrawn from your savings account and invested in the mutual fund of your choice.
Investing excess money wisely and regularly is always beneficial to your long-term financial well-being. It’s also good practice to spread your portfolio across different asset classes, including stocks, mutual funds, commodities, and real estate. Adequate insurance, be it life or health insurance, is also a must in your portfolio.
Often withdrawing money from your investments can become a complicated problem. In order for the money to flow back into your bank account, you need to make sure that the asset documents are in order and that you have met all regulatory requirements. Gaps often appear. Getting stuck at the checkout can be devastating when you need the money urgently.
Retirement planning is important for everyone. A sedentary lifestyle makes you more prone to diseases like diabetes, high blood pressure and heart attacks. Healthcare costs are increasing every year. In the absence of a social safety net, you must have your own funds to fund all of these expenses. Like many others, you may think it’s too early to start planning now. At this rate, you start planning for retirement late and accumulate less than you could possibly accumulate. since it started early. This is due to the “magic of compounding”. It even allows you to retire early and live a stress-free life.