How to Plan for the Future Financially?

" Just remember - when you think all is lost, the future remains."

Yes, the future is yours, but you got to plan for it financially. The first thing you need to remember while planning for your future….It’s Never Too Early To Start. The best time to begin….Right Now.

So how are you going to plan for your future financially? Simple….Before you start worrying about where you want to go, first know where you are. You need to create a net worth statement….This is nothing but an honest measurement of your current wealth. Calculate the value of all your assets (what you own). Then, subtract your loans and debts (what you owe).

• If your net worth is going down….you are losing wealth. So you will be poor.
• If your net worth is going up…. you are gaining wealth. So you will be rich.

Want to know how to plan for the future financially? Just leave a missed call on IndianMoney.com financial education helpline 02261816111 or just post a request on IndianMoney.com website. 

Set financial goals for the future

You are young and newly married. The first thing you do? Talk to your spouse and set your mutual financial goals. Financial goals don’t just happen. You have to make your financial goals. You have to decide, where you want to be 5 years, 10 years or even 20 years, from now.

Just answer some important questions:

• Do you plan to stay in a rented house or buy your own apartment?
• Will you and spouse avail a joint home loan?
• What are your plans for your children’s education and marriage?
• When do you plan to stop working and enjoy a happy retirement?
• Where do you plan to live after retirement?

What if you are single? Well….your financial goals would be different. Your main financial goal would be:

• Saving/Investing for your marriage. Weddings can be really expensive. The diamond wedding ring, wedding clothes, renting of the hall, good food for the guests….The list is endless.
• Today, job security is just a pipe dream. Layoffs are common nowadays. Unfortunately if you lose your job, you are single and you do not have a spouse, on whose income you can depend. You need to set up an emergency fund (money set aside for the future to meet such emergencies).

Have sufficient life and health insurance

Never step outside your house, without a life insurance plan and a health insurance plan.

“If a child, a spouse, a life partner, or a parent depends on you and your income, you need life insurance.”

                                                                                                                                                    - Suze Orman

Why do you avail life insurance? It has to be for risk protection. Your family must not suffer financially, in your absence. Your family must enjoy the same standard of living, they currently enjoy. Your children must not be deprived of a good education and a bright future. The best life insurance plan you can think of….A term life insurance plan. This is the cheapest life insurance, which gives you the best – Pure risk protection.

If you/policyholder meet an untimely demise:

• Your spouse and children get money called the death benefit, based on the premium you pay.

If you survive the term of the plan:

• You get nothing, if you survive the tenure of the plan.

Remember: If you are just married with or without children, you must have a term life insurance plan. If you are the sole breadwinner of your family, don’t forget the term life insurance plan. If you are single and parents depend on your income, avail a term life insurance plan.

Why health insurance? Hospitalization is very expensive. A health insurance plan, would help you settle costly medical bills. If you are married, avail a family floater health insurance plan. Your entire family is covered under one single plan.

Strategic Planning for a secure future

Your financial goals are set. You know where you are going. Now all you need to do, is get there.    

• Cut debt: Are your expenses higher than your income? You’re living beyond your means. Cut down on expenses, or you could fall in a money trap. How can you do this? You struggle repaying your personal loan or credit card dues. Your personal loan and credit card dues, are high cost loans. Personal loans charge interest, as high as 16-22% a year. With credit cards, interest is even higher at 24-36% a year. Avail a secured loan (loan against collateral), such as loan against property, gold loan or even loan against FD.  These loans charge a lower rate of interest. Avail a secured loan and pay back your personal loan or credit card dues. Then repay the secured loan and save on interest.
• Invest for retirement: Invest your money in financial instruments, depending on your risk profile and time horizon. Risk profile is the amount of risk, you can bear in your investments. Time horizon is how long you can, or want to stay invested. If you like to take risk in investments, invest in equity for retirement. Equity gives high returns over the long term. As you near retirement, shift your money to safer instruments such as bonds and FD’s. If you are a conservative investor, invest in FD’s and PPF. PPF is a very good investment for conservative investors. It gives higher returns than inflation over the long term.

Let’s end this article with a great motivational saying…. “You are young at any age, if you’re planning for tomorrow. Plan well before you start your journey. Remember the carpenter’s rule…Measure twice, cut once.