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7 Easy and Foolproof Ways to Secure Financial Future : Personal Financial Planning

Money Money Money!!!.

Lets face it, we may love or hate money but it certainly cant be ignored. We plan for everything else and everything else comes from exchange of money. Its so more important to plan things about money. I think money is not yet become a topic of household discussion around dinner tables. So the relevant information about that is hard to reach oneself beforehand. It only comes once you start earning and start paying taxes, and then our simple aim would only be to save some taxes on our hard earned money, and that's all. I suppose that is all there that a middle class earning person thinks about their money, in their early days of earning careers. Its so important to start early, but even if its late , its never too late.

Why do we need planning?

Because that's what responsible people do to make living less worried, and to create a systematic plan to reach life goals, as one would have planned for itself like buying a sedan or a retirement home or as cliché as a world tour.

We all mostly depend on monthly income and that takes care of expenditure. It can be  a single income family  or financial independent family, the financial planning is must for a worry-less future. Also I for one has experienced, that if i dint plan, I would end op spending most of my earnings. I would always find something worthwhile to spend on all the time. So this planning is to priorities the spending in terms of savings for a expected quality of future and life on the whole. And let me assure the planning doesn't reduce your purchasing freedom but essentially increase it. After knowing that essential causes are taken care of, you may choose to do spending without any worry, and also keeping your financial future secure. Even for financial independent ones , there is going to be a family or kids, so with the arrival of responsibility all the rules shall now apply.

Also, what i have learnt from my own life experience that, its pointless to dig a well when you are thirsty, its only going to upsurge your thirst. So all i am saying lets dig a well while we can in advance and never worry about thirst.

Since the discussion around our dinner table is never about personal finance except monthly budget may be. But what i am talking about here is not a monthly budget but a budget that is extrapolated for months of a lifetime, and  its beyond that in somRee cases.

We will go through 7 easy and simple steps to make our path that will lead us to a foolproof status of financial future.

Now many of you are with me, but would be wondering where to start this planning. I am putting a 7 step ladder to reach your financial secureness. The steps involve are as followings. If you happen to get stuck at some technical word of finances, just move ahead and may be you can drop me message, i would do my best to explain that to you. But don't stop just go through these steps. They are in a chronological way. I.e. First is the starting and then moving to the next step. I strictly recommend not to jump or skip any step. You would understand why i say that by the end of the read.

7 Easy and Foolproof Ways to Secure Financial Future:

  1. Make an Emergency fund
  2. Paying off Existing Debts
  3. Get a Health insurance
  4. get a Life Insurance
  5. Make a retirement fund
  6. Goal oriented planning
  7. Review of financial plan
Lets see how we go from one step to another, one  by one : 

1. Make an Emergency fund

Its an uncertain life. for example, It can happen that you just bought an expensive furniture for your house and because of some unforeseen or due to world affair, you are to let go of your job.Now you are out-of payroll. The emergency fund will give you that support for your essential expenditure while you are unemployed and search for new job. 
                 Money worth for at least for 3 months of expenses must be saved in an emergency fund. 5-6 months are recommended to give you a little extra cushion in hard times. This Emergency fund must be in an all time accessible savings bank account. It may lay there and earn you some basic 4-5 % interest, but its very important to have it.

2. Paying off Existing Debts 

The next step is to pay off debts with high rate of interest like credit card debts or personal loan, etc. If you pay 10-12 percent of rate of interest, that eats away all your saving's earnings that earns max up to 7-8 percent in traditional saving instrument. So with explained reasons, I would highly recommend paying of high rate of interest debts, and getting rid of that do not create any value. Home loans however are cheaper and also create value alongside as the house price  rises with time conventionally. 

3.Get a Health Insurance 

The world is a less healthier place to live in now a days. The increase in pollution, traffic. With new deceases, the health can drastically degrade in no time unlike earlier days when it used to be less industrialised era. Also with the presence of dependents its a must do. You would not want your years of savings go directly to hospitals. Its a tricky world of health. Its highly interactive to what we eat, where we work, the traffic, etc. The stress is coming out to be root cause of many deceases these days. The health insurances are available for less premium as they are very competitive in this day and age. Its a must have before any other savings plan. If there is any hereditary decease that runs through family, its highly recommended to get as an health insurance as early as possible for one and everyone in the family. 

4.Get a life Insurance

Its an assurance to the dependent that even after you are gone due to unfortunate accident or any other unforeseen reason, the family is well protected financially. As in the absence of this, the left ones would be immediately exposed to the essential expenses, that you would not want. So a life insurance can give you that security to your dependents even when you are not there. Many of life insurances pay assured sum, so it is seen as some kind of savings as well. I would recommend a pure term plan, the reason being cheapest premium that will not change throughout term of life with inflation, and cover amount is comparatively manifolds than conventional life insurances plan. So a term plan is highly recommended only if you have dependent, or you would be having dependent soon in future. I recommend getting a term plan as a gift to your wife on your day of marriage, She must feel very protective and also the fact that, its really deserving for her. In case of lady the gift may be vice versa

5. Make a Retirement fund

The days when you have reached an age and you stop getting payouts, what you are going to do, may be there are another 30-40 years of life left. Its would be extremely rude and careless to ignore  retirement planning.
                Its a thumb rule that its always easier to plan for the later-most, as you reach close to the event you can only do so much for that for that event. It is recommended to put money aside in some long term saving instrument or fund devoted to retirement. It must be started, even if the contribution towards it may not be very high. Always have faith on 8th wonder of compounding interest. if given enough time it would create wealth for you let alone retirement plan.

Its always a careless attitude that i am young and i must not be thinking of retiring in any circumstances. If we see most successful people, the entrepreneur, they all talk about early retirement. Its about doing your essentials, save money so that you can actually, work on or do things that you want. Getting rid off someone Else's payroll and doing your own entrepreneurial things, or may be things like world tour or some serious hobby, anything that may be only you know you want to do. The trick is to get out of payroll job and save enough for your retirement days. Again Its high time we stop assuming that retirement is an age thing. Its not. Its just a retirement of payroll job, that means you don't necessarily have monthly payouts. So save for it.

6. Goal Oriented Planning 

Now you have come to a stage where you can start savings for your future goal. Its one thing to save and then use them on things wherever you want. What i would recommend here is to save for certain goal and achieve it. We all dreamt of having a luxury car, so start a mid-term fund for that. Likewise there are so may goals small , large, near or distant. We must do savings goal oriented as it will make you most likely to get there. The idea is to get beyond the fog of randomness and be very prioritised. The savings can be in debt funds, Fixed deposits, Provident funds, Equity funds, Balanced funds, Ulips. etc.

As of saving instrument, I would be putting up a detailed discussion on my blog and give a link here. The  right kind of fund carefully chosen can create wealth.

7. Review of Financial plan

The world of finances are of dynamic nature in itself, and affected by so many factors viz. personal, family, demographic, or political etc. It is recommended that annually once may be, is enough to devote time to review the existing financial plan. Do some changes here and there if needed, and you are good to go.

Good luck for your future that hopefully would be better planned after you read this.

Thanks a lot for a read, if you like please share with anyone you know. We must give access to basic knowledge of financial planning to the one and everyone.

Cheers, happy investing.


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