Money is the most important thing in life and yes…. it is always in shortage. This means you have to plan for your limited finances. Remember the only time money talks is when it says goodbye. You may have a shortage of money but your needs only increase .This is where financial planning for money goals comes in.
You have goals in life which need money.
- Money for your children’s education.
- Money to buy a car
- Money for a holiday in India or abroad
- Money for your retirement.
- Money set aside for investments
Financial planning involves clearly defining your financial goals and setting aside money regularly to meet these goals.Just earning money is not enough. Deciding where to spend how much money (Decisions based on most important needs) is financial planning.
Risk decides financial planning
Your ability to bear risk decides returns you will get from an investment. If you are willing to bear a higher risk you will be able to get higher returns. If you invest in equity (shares/mutual funds) you will get a higher return but bear a higher risk. (Your money could increase or be lost) This is why mutual fund investments come with a disclaimer Mutual fund investments may be subject to market risks. Please read the offer document carefully before investing. If you are not willing to bear a higher risk, then you must settle for lesser returns. You will choose safe investments such as fixed deposits where your money is safe but your returns are less.
Do not put all your eggs in one basket
Spread out your investments. Do not invest all your money in a single investment avenue. If you invest only in equities and the stock market crashes you will suffer a huge loss. Keep a portion of your money in safe instruments such as a fixed deposit and at least a part of your money in gold. At least 5-10% of your money needs to be invested in gold which is a safe avenue (option).
Avoid unnecessary debt
The temptation to swipe your credit card may be great but exercising self control is very important. Credit cards have a high interest rate of around 30-36% a year. If you are not able to pay back the borrowed amount within the billing cycle (You get a time of 30 days and an additional 25 days called grace period) you have to pay this interest. Do not avail a personal loan unnecessarily on mere whims and fancy. Avail this loan only in an emergency.
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