2 min read
16 May

Start by knowing your financial goals and make it specific, realistic and actionable. Experts say financial planning must be planned to reach its intended goal.
Financial goals are the basis for planning your profitability, cost and investment activities. Most people want to follow a healthy financial lifestyle, but they don't know where to start. Start by knowing your financial goals and make it specific, realistic and actionable. Experts say financial planning must be planned to reach its intended goal. One should start by creating a pool for unforeseen circumstances, then selecting the right insurance and building a corpus to meet one's short and long-term financial goals.

Find out how to know your finances to meet your desired goals: 

  1. Contingency Fund
    Creating an emergency fund is the first step to take before investing your money in other financial instruments, financial advisers say. Having an accident fund in the event of a financial crisis, such as sudden job loss, severe illness or accident, helps someone. This type of account provides instant liquidity and flexibility as it provides a high interest rate, which is recommended to put into a high-income savings account. Generally, a person should invest in an emergency fund for five to six times their monthly recurring expenses. One must also remember to increase the size of their emergency fund in line with the increase in monthly income.
  2. Long Term Insurance & Health Insurance
    With the rising medical costs, it is imperative to purchase adequate term and health insurance plans. It is important to choose between these two policies to avoid high medical bills and to protect your family from uncertainty in the event of any unfortunate events.
    Long-term insurance provides the insured family with a guaranteed amount of money to act as a substitute income for the family in their untimely death. It is recommended that you purchase term insurance for 10 to 15 times of current annual income and increase cover as income increases. The premiums are very low compared to the benefits and cover amount that term insurance offers. The premium paid for term insurance is also tax deductible under Section 80C.
    Health insurance is facing rising medical costs. Most people rely solely on their employer's health policy, which is often inadequate or wiped out in a single hospital. People with a family can choose a family floater plan that includes their parents, spouse and children. Top-up medical policies can also be selected to cover high medical costs in the event of an accident or disability. Additionally, the premium paid for health insurance can be claimed as a tax deduction under Section 80D of the Income Tax Act.
  3. Short-Term Goal Investment
    Although the deadline for short-term goals is not clear, the short-term goals are usually within a few months or within 1 to 2 years. Short-term goals include saving for a car payment or a family vacation. Financial planners are advised to invest in high-yield FDs or low- to moderate-risk debt mutual funds to achieve such short-term goals.
  4. Medium to long-term goal investment
    Medium to long-term goals have a duration of approximately 3 to 5 years or more. This usually includes investments in the child's higher education, marriage, home purchase, or building a retirement corpus.
    Investment in equity mutual funds should be considered for such purposes. Traditional investment options such as Fixed Deposits (FD) and Public Provident Fund (PPF) are not sufficient to achieve these objectives and may fail to raise the required corpus or provide returns on inflation. Along with the availability of a wide range of schemes and funds, mutual funds provide returns that inflate inflation. Industry experts say that for new or risk-averse investors who are reluctant to invest in full equity, they can opt for balanced funds that combine debt and equity and balance the risk-reward ratio with investors.

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