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Review Your Financial Plans With IndianMoney Research Team | Posted On Wednesday, November 14,2018, 06:06 PM

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Review Your Financial Plans With IndianMoney



Financial planning is a process of meeting financial goals through proper money management. Financial goals could be short term like going on a vacation, mid-term like buying a car or long term like retirement or buying a house. Financial planning helps achieve strategic goals and objectives.

Take a look at financial planning thumb rules. One of the first rules of financial planning is Pay Yourself First. Save a part of monthly income before spending. As income rises make sure to save more. Follow the 50-20-30 rule. About 50% of your income should go for living expenses, 20% for savings for medium/long term goals and 30% for spending like travel and vacation.

Want to know more on financial planning? We at will make it easy for you. Just give us a missed call on 022 6181 6111 to explore our unique Free Advisory Service. is not a seller of any financial products. We only provide FREE financial advice/education to ensure that you are not misguided while buying any kind of financial products.

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Financial planning steps:

1. Identifying your current financial situation:

  Make a note of all income and expenses, no matter how small. Investments could be across equity and debt like life insurance, FDs, mutual funds, shares and even bonds.

2. Take hold of risk appetite: Identify risk profile. This could be aggressive, moderate or conservative. Financial advisors have to identify the amount of risk clients are willing to bear in investments.

3. Identify financial goals:

Define financial goals in terms of value and time to attain them. This helps in saving and investing towards achieving them.

4. Mapping of financial assets:

You have to map assets against financial goals. You will have to decide where and how much to invest. This is where asset allocation comes in.

5. Identify unforeseen risks

Planning for risks is an essential part of financial planning. This is where insurance planning comes in. You need a life insurance and health insurance plan to protect from risk.

6. Constant monitoring of the plan:

A key element of financial planning is monitoring the financial plan. Where you are, Where you want to be and take the necessary corrective action.

Types of financial planning:

Cash flow planning: Cash flow is the total amount of inflow and outflow of money. It is a record of every rupee earned and spent. Cash flow planning shows the position of finances, and helps invest without stretching your money.

Retirement planning: Sound retirement planning makes sure there’s a lot of money when you retire. To enjoy a happy retired life, you need to make smart investment decisions today. Retirement planning is equally important as marriage and career. Retirement planning is important as life span increases and working years decrease or remain the same.

Investment Planning: Understand the difference between saving and investment. Saving is great but financial planning involves investment. You get rich only if wealth grows. Invest in suitable financial instruments to grow your wealth.

Investment planning is all about risk you are willing to bear in exchange for returns. You have to set the time horizon and liquidity requirements vis-à-vis investments. This helps you get the maximum benefits out of the investment.

Tax planning: You can reduce tax liability by effective tax planning. It is making use of tax deductions and exemptions to save tax. Tax planning helps increase after-tax income. Making smart investment decisions to save taxes is an essential part of tax planning.

SEE ALSO:Retirement Planning In India

Children’s education planning: This helps save and invest for children’s education and marriage. Giving a child a good education and career involves saving and investing at regular intervals. A child plan with waiver of premium rider ensures child’s education even if you are not around.

Financial planning checklist

  • What are my financial goals?
  • How much money I need and when I need it?
  • How much risk can I take?
  • Where should I invest?
  • What is my net worth? tells you financial planning helps assess wealth and tells you where exactly you stand. This gives an idea of where you are and where you should be.

Insurance planning:

  • Protect wealth with insurance like car, home and health insurance.
  • Transfer wealth to family with life insurance.
  • Prevents loss of income because of accidents and permanent disability.
  • Saves money as some insurance plans carry tax benefits.
  • A child plan helps secure money for children’s education and marriage.

IndianMoney says, Never mix insurance with investments. Go for pure protection plans. Avail a family floater plan if you have a nuclear family. A health insurance plan is a must for self-employed.

SEE ALSO:Best Pension Plans In India

Tax planning:

  • Avail tax deductions and exemptions to save tax.
  • Understand tax rules
  • File ITR in time to avoid penalties.

IndianMoney says don’t lose money to tax. File ITR in time and make use of tax exemptions and deductions to save tax.

Why you should regularly review your financial plan?

Why do you go for a medical check-up at regular intervals? Isn’t it to stay in good health? In much the same way, the financial plan requires a regular review.

Set achievable goals: When setting financial goals it is very important to set achievable goals. Setting unachievable goals demoralizes you and it’s a setback to the financial plan. If you have set unachievable financial goals, review the financial plan. Review both the financial instruments you have invested and the investment. A simple example of financial plan review is if you have set a financial goal to retire at 55 and find the money insufficient, reset the retirement age at 60. Let’s say you had planned to buy a house for Rs 90 Lakhs. You find the investment insufficient? Then settle for a house of Rs 75 Lakhs.

Salary is hiked: A hike in salary calls for review of financial goals. A big salary hike means financial plan review. You might have got a windfall like EPF money or an inheritance. It’s time to revise investments and investment objectives. You can set new financial goals or allocate more money towards investments.

Set up an emergency fund: As your family grows you need an emergency fund. Keep at least 3 months of living expenses in the emergency fund if you are single. Make this 6 months if you are married.

Increase in number of dependents: If there is an increase in the number of dependents (say the birth of a child), review financial plan. You might need additional life or health insurance. You would have to set aside more money towards investments. Make sure you do Estate Planning by writing a WILL as dependents increase to avoid fights and controversy.

Change in the tax status: Let’s say you have changed your job and got a salary hike. This puts you in the higher tax slab. You might need to focus on tax planning to save more money.

Your risk tolerance and risk appetite have changed: If you have turned from a conservative investor to an aggressive investor, review financial plan. You might have to review the investment plan as you go for more aggressive investments.

When should you review financial plans?

  • There is an increase in income or you get a windfall like EPF Money.
  • You are looking to take a sabbatical.
  • There is an increase in family size.
  • You change your job.
  • You are married or enter major milestones.
  • You fall in the higher tax brackets.
  • Your risk tolerance changes.

What to consider in financial review?

  1. advises you to update financial advisor on life changes: Your financial advisor must know your important milestones to make the right financial decision. If you are newly married, this calls for a financial plan review. Your financial advisor will draw up a new plan or reform the current financial plan.
  2. advises you to check your investments: Check if investments are giving returns in line with the financial plan. If investments are not performing up to standard, then decide where to allocate the money. Asset allocation is very important in a financial plan.
  3. Is your retirement on track: Healthy ROI (Return on Investment) and more allocation of money towards retirement helps retire early. Do financial review to check if investments are on track to achieve early retirement.
  4. Interact with financial advisor: Your financial advisor knows a lot of people (has handled a lot of clients) with similar financial goals or who have been in similar situations. He is in a unique situation to help with financial and life goals.
  5. A financial plan is all about getting to know you, discovering all your options, discussing your financial plan and taking corrective action when necessary. Do understand that just as financial goals change, life situations and life itself changes, so must your financial plan. There is no perfect financial plan for all situations. A financial plan aims to achieve perfection by being flexible and incorporating life’s changes and important milestones to get you to the financial destination. 

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