\r\n\r\n<\/span><\/p>\r\n \r\n\r\n<\/span><\/p>\r\n Financial planning is a comprehensive evaluation of an individual’s current and future financial state by using currently known variables to predict future expenditure on different heads i.e. Insurance Planning,\u00a0Retirement Planning, Tax Planning, maintaining and enhancing cash flow through debt and Lifestyle Management.<\/span><\/p>\r\n \r\n\r\n<\/span><\/p>\r\n \r\n\r\n<\/span><\/p>\r\n After earning money how you utilize it is very important. You should have the management of your money. The first thing is to fix money for your various expenditures. Then try to save some money from your earning. You should save as much as you think about you can. Don\u2019t spend lavishly and don\u2019t buy the things that you don\u2019t need. Just try to save 20% of your income.<\/span><\/p>\r\n \r\n\r\n<\/span><\/p>\r\n You can save your money by some small sacrifices.<\/a><\/span> Everyone has a desire to buy a vehicle or car or build a house, but where the money will come becomes a problem. Here your savings and small sacrifices will fulfill the desires. Business concerns and famous e-commerce companies give a 40-50% discount or buy one get one free offer on various items on various occasions. This is their business policy. You should think about whether you really need the item. Don\u2019t get tempted to these kinds of offers and spend your money unnecessarily.<\/span><\/p>\r\n \r\n\r\n<\/span><\/p>\r\n \r\n\r\n<\/span><\/p>\r\n If you find that your money comes to an end until the end of a month, you need to regulate your expenses. Here you need to cut your expenses and live according to your own way. There may be some unplanned expenses like medical, function at home, celebrations of family or religious events, etc. You can have a budget for these things and a reserve fund for them. You should always see your present priorities on the basis of which you can have a budget. When you fulfill the necessary expenses, you can save or allot funds for entertainment or luxury.<\/span><\/p>\r\n \r\n\r\n<\/span><\/p>\r\n \r\n\r\n<\/span><\/p>\r\n Always maintain a record of your every expenditure. Every day you should write down every expense you have done. Then sum all the expenses incurred in a month. Here you can see the total expenditure for a month. Then subtract the amount from your income. You will get the surplus money. This is your savings. By having a record of expenses you can have an exact idea of your expenditures so you can spend accordingly.<\/span><\/p>\r\n \r\n\r\n<\/span><\/p>\r\n \r\n\r\n<\/span><\/p>\r\n The most vulnerable thing is your health. So, you should first secure the health of you and your family members. To do this you must buy a term insurance plan for self. It is more important when you are the sole bread earner of your family. The term insurance plan provides policyholders higher risk coverage at reasonable price. You can buy a plan that can secure 10 times of your annual income. You also need health insurance for you and your family members. Health insurance can lessen the financial burden for medical treatment.<\/span><\/p>\r\n \r\n\r\n<\/span><\/p>\r\n The most important thing is you should buy a term insurance plan at an early age. Whenever you start earning you should take a term plan. The earlier you take a term plan, the lesser the premium will be for the term plan and Family Floater Health Insurance for emergency medical expenditure.<\/span><\/p>\r\n \r\n\r\n<\/span><\/p>\r\n \r\n\r\n<\/span><\/p>\r\n Suppose, you buy a term plan at the age of 25 and you want to continue this plan till the age of 60 years and a sum assured is Rs. 1 Crore. So, the duration of the term plan is 35 years. If you choose a Term Plan at the age of 25 then you have to pay Rs. 6800\/- per year. If you choose a Term Plan at the age of 30 then you have to pay Rs. 8300\/- per year instead of choosing a term plan at the age of 35 that costs Rs. 10,200\/-. So, you have to pay a lesser premium at the age of 25 instead of at the age of 35.<\/span><\/p>\r\n \r\n\r\n<\/span><\/p>\r\n \r\n\r\n<\/span><\/p>\r\n \r\n\r\n<\/span><\/p>\r\n If you take a family floater plan at the age of 30 years of Rs. 5 lakh and the plan consists of self, your spouse and 2 dependent children, you have to pay Rs. 11,000\/- on a yearly basis. But if you take the same plan at the age of 40, you have to pay Rs. 16,000\/- on a yearly basis. So opt for a family floater plan as early as possible. It is better to take a family floater plan just after marriage and later you can include your children.<\/span><\/p>\r\n \r\n\r\n<\/span><\/p>\r\n \r\n\r\n<\/span><\/p>\r\n \r\n\r\n<\/span><\/p>\r\n Now what you do with your savings is a vital matter after taking a term insurance plan and fulfill. Your present management of investment will determine your future. You can put your savings in the stock market via mutual funds. As a smart investor, you can invest little amount per month via a Systematic Investment Plan (SIP) in a good mutual fund. You can have your start with a nominal amount. Then in the future about you may increase your investment. But why you should invest in the stock market either via mutual fund SIP or via direct equity,<\/span><\/p>\r\n \r\n\r\n<\/span><\/p>\r\n \r\n\r\n<\/span><\/p>\r\n Read also: 10 Reasons to Invest in the Stock Market<\/a><\/span><\/span><\/p>\r\n<\/blockquote>\r\n \r\n\r\n<\/span><\/p>\r\n In order to make perfect financial planning, you must have a clear view and a good understanding of the expenses that will be required to live even after retirement. The current inflation rate is 7% per year. It means next year you will need Rs. 107\/- to buy the same product you can buy now with Rs. 100\/-. So if you can fulfill your requirements with Rs. 20000\/- per month now, you will need Rs. 1, 20,000\/- approximately per month after 30 years. Consider the case of inflation and do the needful.<\/span><\/p>\r\n \r\n\r\n<\/span><\/p>\r\n \r\n\r\n<\/span><\/p>\r\n Now let\u2019s calculate the desired corpus you need to accumulate when you retire at the age of 60 years if you have started your professional career at the age of 25 years.<\/span><\/p>\r\n \r\n\r\n<\/span><\/p>\r\n Suppose you have started earning at the age of 25 years and your earning is Rs. 25000\/- monthly. So, you have got 35 years to achieve a sufficient amount in order to make a happy and prosperous retirement life.<\/span><\/p>\r\n \r\n\r\n<\/span><\/p>\r\n Your yearly salary \u2013 Rs.3, 00,000\/- assuming Rs. 25,000\/- a month.<\/span><\/p>\r\n \r\n\r\n<\/span><\/p>\r\n Your Yearly Household Expenses \u2013 Rs. 1, 80,000\/- assuming Rs. 15,000\/- a month.<\/span><\/p>\r\n \r\n\r\n<\/span><\/p>\r\n Term insurance premium \u2013 Rs. 7,000\/- assuming assured sum of Rs. 1 crore for a term of 30 years.<\/span><\/p>\r\n \r\n\r\n<\/span><\/p>\r\n Health insurance premium \u2013 Rs. 8,000\/- assuming a cover-up to Rs. 5 lakh\/ year for a term of 30 years.<\/span><\/p>\r\n \r\n\r\n<\/span><\/p>\r\n Expenses on festive season = Rs. 25,000\/-<\/span><\/p>\r\n \r\n\r\n<\/span><\/p>\r\n \r\n\r\n<\/span><\/p>\r\n So, your expected expenses throughout a year is = Rs. 1, 80,000\/- + Rs. 7,000\/- + Rs. 8,000\/- + Rs. 25,000\/- = Rs. 2, 20,000\/-.<\/span><\/p>\r\n \r\n\r\n<\/span><\/p>\r\n Then, the expenses at the age of 60 years assuming a current inflation rate of 7% will be = Rs. 21 lakh. [excluded term insurance premium and health insurance premium since they are fixed at the time of buying].<\/span><\/p>\r\n \r\n\r\n<\/span><\/p>\r\n So, you have to accumulate a corpus of [Rs. 21 Lakh \u00d7 20 years = Rs. 4.2 Crore] at the age 60 years assuming you will live at least 80 years.<\/span><\/p>\r\n \r\n\r\n<\/span><\/p>\r\n Let\u2019s assume you have two kids i.e. one daughter and one son. So, the Education cost of son & daughter as well as the daughter\u2019s marriage after 20 years = Rs. 40 Lakh.<\/span><\/p>\r\n \r\n\r\n<\/span><\/p>\r\n Total amount need = Rs. 4.2 Crore + Rs. 40 Lakh = Rs. 4.6 Crore.<\/span><\/p>\r\n \r\n\r\n<\/span><\/p>\r\n \r\n\r\n<\/span><\/p>\r\n \r\n\r\n<\/span><\/p>\r\n Now, you need to consider the perfect asset allocation strategy and investment route to make an early retirement if want so.<\/span><\/p>\r\n \r\n\r\n<\/span><\/p>\r\n The asset allocation in different buckets enables you to manage or diversify the risk. Equity is such an asset class that has some moderate risk than the other asset class like the bond, debt securities. But historically, equity yields more returns over a long period of time. So, what will be your asset allocation irrespective of your age? A generally accepted trick is that you have to subtract your age from 100 to determine the percentage of your investment to the equity asset class.<\/span><\/p>\r\n \r\n\r\n<\/span><\/p>\r\n \r\n\r\n<\/span><\/p>\r\n Let\u2019s illustrate,<\/span><\/p>\r\n \r\n\r\n<\/span><\/p>\r\n Total value = 100<\/span><\/p>\r\n \r\n\r\n<\/span><\/p>\r\n Your age = 30.<\/span><\/p>\r\n \r\n\r\n<\/span><\/p>\r\n So, you may invest [100-30] = 70% of your fund or capital in equities or stock market. The remaining 30% of your fund can be divided between corporate bonds and debt securities. If your risk appetite is high, for better returns over a long period of time you can invest your 90% investment into equity or stock market before or on attaining the age of 30. Since you are young you can afford to wait and see for a long time. Therefore, any correction in the stock market may be a buying opportunity. Basically, the equity asset class has a record to yield more returns than any other asset class i.e., debt instruments over a long period of time.<\/span><\/p>\r\n \r\n\r\n<\/span><\/p>\r\n \r\n\r\n<\/span><\/p>\r\n \r\n\r\n<\/span><\/p>\r\n In order to make an investment in the stock market, the beginners have two options. The first option is to invest via direct equity by opening a Demat account and the second one is via a mutual fund. In order to make a profit in the stock market via direct equity, you need to analyze the fundamentals, business analysis, balance sheet, profit and loss account, free cash flow while choosing the stock in which you are going to invest.<\/span><\/p>\r\n \r\n\r\n<\/span><\/p>\r\nWhat is Financial planning<\/strong><\/span><\/h6>\r\n
Manage your Money<\/strong><\/span><\/h6>\r\n
![\"50\/30\/20](\"http:\/\/capitalante.com\/wp-content\/uploads\/2019\/02\/50_30_20-Rule.png\")
<\/a><\/span><\/p>\r\nRegulate your expenses wisely<\/strong><\/span><\/h6>\r\n
Maintain a personal record<\/strong><\/span><\/h6>\r\n
Get your risks covered<\/strong><\/span><\/h6>\r\n
<\/a><\/span><\/p>\r\nIn the case of Term Insurance Plan<\/strong><\/span><\/h6>\r\n
<\/a><\/span><\/figure>\r\n<\/div>\r\nIn the case of Health Insurance Plan<\/strong><\/span><\/h6>\r\n
<\/a><\/span><\/figure>\r\n<\/div>\r\nDealing with surplus cash judiciously<\/strong><\/span><\/span><\/h6>\r\n
\r\n
\r\n
Set up a realistic corpus you need in the future<\/strong><\/span><\/h6>\r\n
Retirement Planning<\/strong><\/span><\/h6>\r\n
Total Expenditure<\/strong><\/span><\/h6>\r\n
<\/a><\/figure>\r\n<\/div>\r\nMake a roadmap to reach your desired corpus<\/strong><\/span><\/h6>\r\n
Asset Allocation Strategy<\/strong><\/span><\/h6>\r\n
<\/a><\/span><\/p>\r\n\r\n
By which route a common individual can start investing in the stock market<\/strong><\/span><\/h6>\r\n