Financial planning: Top 6 benefits to enrich your future

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Published: December 15, 2016 5:09:58 PM

Before investing, you need to know your priority financial goals by asking a few questions to yourself: For what reason I am going to invest my money? What purpose will it serve for me? And for how long I need to remain invested?

financial planning, future need, insurance planning, investment planning, secure finances, financial goals, goals, ELSS, mutual fund, tax-free bonds, capital appreciation, SIP, lock in period, tax planningThe popping questions may disrupt your thinking for planning so many financial goals altogether. So keep things simple and plan for individual financial goals which you want to achieve in a cumulative time zone.

Financial planning: Before investing, you need to know your priority financial goals by asking a few questions to yourself: For what reason I am going to invest my money? What purpose will it serve for me? And for how long I need to remain invested? The popping questions may disrupt your thinking for planning so many financial goals altogether. So keep things simple and plan for individual financial goals which you want to achieve in a cumulative time zone. Not only in building wealth, financial planning also helps you to secure your finances the other way round.

 
Proper financial planning helps in securing finances: For a long-term financial goal, you need to think and rethink about the continuity of savings you need to do for a longer period of time to achieve that goal, keeping in mind any mishappening which can occur during that stage. A planned goal always helps you in evaluating your need-based insurance which you need to take to cover your financial losses. Ideally, one should go for a term insurance because it gives you protection cover for a very big amount – normally from Rs.50 lakh to Rs 1 crore at a very low premium of approximately Rs.25 a day.

 
Helps in tax planning: Investment in certain funds provides you with a dual benefit. One, getting good returns & secondly, helping you in savings taxes where you can save up to Rs.1.5 lakh under section 80C of Income Tax Act 1961. Various options available are ELSS mutual funds, PPF, tax-free bonds, etc. Except for ELSS which is having the least lock-in period of 3 years, others have a lock-in period of 5 years or even more.

 

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Helps in building your assets: If you have planned properly for your future goals like going on a vacation, you need not have to do your spending through a credit card or by taking a loan and increase your liability. In fact, prior savings will help you in growing your financial assets. This way you can easily afford to buy an asset or go out for a vacation without indulging into debts and paying long-term EMI’s.

 
Guilt free spending: Many of us do not plan for the monthly budget because of which we come into the category of spendthrifts where our expenses exceed our savings and therefore we are not able to plan for a goal. You should always save first & then let your expenses flow. Goals maintain the accuracy in your spendings rather than scooping out a lump sum from a general savings account and spending the whole amount.

 
Improves your standard of living: It brings the level wealth, comfort, material goods and necessities available to certain people who plan according to their financial goals. Every goal, whether it is buying a house or buying a car, increases your net worth and upgrades your standard of living. A financial goal helps you grow your money logically in a defined pattern with known standard.

 
Capital appreciation helps you achieve your target by saving less: It is better to plan for today rather than buy things at the last moment and then keep paying the interest for the next 7 to 10 years. For instance, you are planning to purchase a house after some years. For doing that, you need to save money to built the total corpus for this financial goal. Let us take an example. Mr Kumar has just started his job in an MNC and wants to buy a Rs 1-crore 3-BHK home for himself after 20 years. Assuming the rate of return at 15%, he needs to start saving Rs.6500 per month to achieve his desired goal in 20years. That is, by investing only Rs.15.85 lakh approximately, he will be able to achieve his goal. This helps him attain a standard amount in a specific time period. This means that if you have started planning to buy a house today, you will surely grab it after the end of 20 years.

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