Have you ever envisioned your life after your 40s and 50s? Do you wish to travel the world? Spend quality time with your family in your vacation home? Or invest your time to pursue your hobby? The list can go on and can be different for each of us. However, the path to fulfilment is common – financial planning!
With the graph of expenses moving only upwards with time, it is important to recognize if you can sustain your non-working retirement days without the extra burden of financial challenges. Today’s financial planning acts like a friend to your retirement life, helping you save that adequate penny for your golden years. So, how do you go about it?
Tapping the Power of Financial Planning
It is needless to say that financial prudence is the key to ensuring that you have enough savings for the future. After all, leading a life without the right financial planning is like using a hook without a bait. If you follow a few golden principles of financial planning to a T and take control of your earnings, you might never have to see a day when your wealth erodes, leaving you in the lurch.
We bring you 6 principles to help you kick-start your journey of financial planning:
1. Pay yourself first:
Your employer is paying you, but are you paying yourself? Let’s understand with the help of Sudhir’s story. Sudhir, a 35-year-old marketer started his financial planning pretty early. Ever since he started earning, he always made it a point to keep aside some of his monthly salary in a fixed deposit. According to this financial rule, you should remember to save at least 10% of your monthly income towards retirement, just like Sudhir. Keep increasing this amount with the corresponding increase in your income. Don’t assume that expenses will come to a standstill when you retire, plan for any eventuality.
2. Remember the 10-5-3 rule:
This is a basic rule of investment. It outlines the returns you can expect from different asset classes on an average. For instance, when you invest your money in equities, in the long term they can give you close to 10% returns. On the other hand, you can enjoy a minimum 5% return on investments in government bonds and securities. While cash-like accounts such as a savings account will grow at 3% per annum.
3. 100 minus your age rule:
This financial rule can come in handy if you are confused about how to allocate your assets. All you need to do is subtract your age from the number 100. Let us say, your age is 30 right now. So, while you can invest 30% of your savings in debt, 70% should be in equities. The younger you are the more you should invest in equity as per this rule of investment. This percentage ideally should decrease with age as your corpus builds so that you can savour it in your old age. Unit linked insurance plans help you do just that since they offer the flexibility of switching between debt and equity funds as per your convenience. Reap the benefits of equity in your 30s and switch to debt as the maturity of your ULIP nears. Simple!
4. Keep aside emergency funds:
Always remember to be prepared for a situation that demands money at a short notice. It could be an accident or a medical emergency. Keep 3 to 6 months of your expenses in a savings account as a financial rule so that should you face any such circumstances, you have enough to last yourself till everything is back to normal.
5. Know your Human Life Value:
One of the most important principles of financial planning is knowing your human life value to determine how much life cover you need. It should neither be less nor more. You should ideally have a life cover that is at least 10 times of what you earn annually. ULIPs are a great option if you are looking for an instrument that combines both insurance and investment; you can handily take your pick from the Child plans, Retirement plans and Investment plans available on Finserv MARKETS. Although these are market-linked, they give you the flexibility to choose between equity, debt or both depending on your preferences. You can also opt for add-on covers that enhance your coverage.
6. Saving for life’s second innings:
You might not be aware of the expenses that you would incur once you retire. As an investment rule, it is important to build a retirement corpus that is 20 to 30 times your current annual income. You need to account for the rising inflation when you work out how much you need to save today to retire comfortably, say 30 to 40 years from now. ULIPs being long term investments, help you build your retirement corpus in your working years.
In a nutshell
Keeping these principles of financial planning as your guiding light helps you avoid pitfalls in your life. For wealth creation over the long term, creating a retirement fund or for your child’s education, ULIPs available on Finserv MARKETS can always be a good choice. They offer you the right flexibility in terms of choice of funds and are tax efficient too.
You can switch between debt and equity among a bouquet of choicest funds as per your investment goals. What’s more, you also have the advantage of a life cover along with investment returns. With this, take steps towards your financial empowerment by making the right decisions to avoid falling into financial crisis later. After all, tomorrow’s planning begins today!
Want to know more about ULIPs? Read in detail about the ULIP tax benefits with plans available on Finserv MARKETS.
To know more on ULIP investments in depth, you can check out these blogs:
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