Financial planning involves making a thorough assessment of a persons current and future financial obligations based on predetermined goals in a given environment. Financial planning is essential to ensure the money you earn is not squandered but instead multiplies to achieve your life goals. Failing to plan is planning to fail.
Wealth creation in the country only accelerated after the path breaking economic reforms in 1991 of Dr Manmohan Singh under the leadership of the then prime minister P. V. Narasimha Rao. The gains in income and living standards achieved over the last 25 years is today in danger of being squandered by Jumla Economics which is based on the triumvirate of Demonetization, Magic GST and Loan Waivers.
Financial Planning In A World Of Jumla
There is currently no stability in the financial policy of the government. Any law, tax or policy can be changed, withdrawn or introduced at the drop of a hat. This makes it difficult for citizens to anticipate the future and makes their financial plans go awry.
This is where Jugaad in financial planning comes to the rescue. Any Jumla announced by the government can be countered by a Jugaad from the opposite side. Follow the steps outlined below to arrive at a basic financial plan to survive and thrive in this era of economic uncertainty.
1. Have Clear Goals
Depending on how old you are imagine the ideal financial situation you would like to face. How much bank balance you would like to maintain and what assets you would like to invest in. Have a clear view of your obligations and commitments towards family. This could take the form of marriage expenses, studying at a University or visiting abroad. Studies have shown that writing down goals makes it easier to achieve them. So take some time out to chart out your financial goals on paper.
You can take a printout of this PDF planning chart to make things easy.
2. Current View
Undertake a comprehensive review of your income and expenditure for a fixed period of time. Try to estimate if you can augment your income through other means. Eliminate wasteful expenditure by using a personal finance manager. Advance tax planning can save you a lot of money , it is important to consult a tax adviser before you finalize any plan.
3. Make A Blueprint
Once you have completed the above two steps you will now be able to put a plan together. All it takes is less than 30 minutes to create a simple financial plan. You will now have to determine how you will reach your financial goals from your current situation. If your goals are lofty you will need long term planning spread over several years. You can research online and read through countless blogs and investment portals that provide free advisers and calculators.
Evaluate the different benefits and disadvantages of a particular outcome. Also make backup plans for failures.
4. Get Professional Advice
Once your blueprint is ready visit a qualified financial adviser to get a second opinion. These consultants can be found across the the Internet. They are well aware of different benefits that an individual can avail through different financial instruments like bonds, shares and debentures. They will share their inputs and you can choose to incorporate them in your final plan.
5. Time To Act & Review
After completing the steps above, you can start implementing your plan. No person’s financial situation stays the same throughout their life, there are ups and downs. So one must review one’s financial plans at regular intervals. Ideally this can be done once a year by taking out an entire day and pondering over the year’s financial outcomes. Most people review their financial plans in the months of December / January. The end or beginning of the year is a good time to take stock of your financial situation.
Do not forget to keep your plans in view, because once it’s out of sight you will forget all about it. Keep a printout handy at all times and refer to it frequently to ensure you adhere to the required path.
Given below are some thought provoking statistics that you should keep in mind while making your first financial plan.
- Minimum Monthly Pension For Employees of Public Sector Companies in India is Rs 9,000. This is for those retiring in 2017.
- Only 50-55 Lakh People are eligible to receive a pension in India from a working age population of close to 90 Crore. This accounts for 0.5% of the working age population.
- The Average Cost Of Raising A Child Up To 21 In India (including providing quality education) is Rs 55 Lakh. (Figures computed for 2011).
- Age at which you become eligible to receive pension in India is between 56 -60.
- Salaried employees in India have the option of opting for Provident Fund, EPF and EPS.
- You can earn a tax free interest at the rate of 8.65% per annum on the money saved through EPF.