6 questions we need to ask before financial planning
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What is the best way to ensure financial stability? The answer is simple - by planning. A few financial resolutions and goals can help sort out a person’s financial year, and one’s life. As we begin a new financial year, here are some important questions to ask, and some tips and tricks to set your financial figures right.
Q1. What is the purpose of financial planning?
There should be only one purpose to plan your finances - to achieve ultimate “Financial Freedom”. It means attaining that situation in life wherein one can do whatever one wants to do. For e.g. what will you do if you get Rs. 100 crores in your bank account today? Will you still do the same work what you are doing today? Probably Not! Then what will you do, help you set the foundation for real financial planning.
Also, in case a person is no longer able to earn and support the family, like in case of ill-health, accidents, or untimely deaths, planning will ensure that financial settling with family members and dependants is sorted.
Find out the highlights of India’s Budget 2016-17 HERE.
Q2. Why should I invest?
This is a basic but very important question that people fail to ask. One needs to decide if the planning is for retirement, or for children’s education or house or a Car, etcetera. This will help in setting targets.
Q.3 What will happen if I lose my job?
It is essential to have a contingency tentative plan for what to do if suddenly there is no steady income & job. One needs to take steps to improve your financial situation and build on cash reserves while still investing for achieving other goals. This cash reserves should be easily accessible whenever the need arises, as withdrawing money out of other funds like PF/FDs/MFs would be detrimental to overall financial life.
Q4. When do I want to retire and how do I plan to spend my retirement years?
One’s plan should not just be about earning till retirement, but also about how one wants to spend life after retirement. This is key to setting goals and planning one’s finances.
Q5. Which Financial Products should I invest in?
You need to plan your investments carefully amongst the numerous financial products available in the market ranging from Mutual Funds/Equities/ PPF/ FDs/ Bonds/Gold/Silver/Real Estate and a term insurance for securing your life.
Q6. How was my financial performance in the previous financial year?
It is good to do some self-appraisal by asking the following questions:-
Did I accomplish my financial objectives last year?
What was my income & Total Expenses both expected & unexpected?
Did I pay my EMIs/Dues in time or any Late payments; if any?
How much returns I made on my investments; did I exceed my target?
Did I have any surplus money which was lying dead in account only?
Did I touch my emergency fund or didn’t even create the one?
Did I borrow any money and if yes then for what purpose?
Doing this self-examination will open up the ways to set new year targets for accomplishing Financial objectives.
Savings and smart investments are simple steps to create long term wealth & assets for securing your future so make your yearly finance plan today and be stress free & welcome financial year 2016.
If you have any queries about financial reforms and planning, you can ask expert Rishabh Parakh by commenting on our Facebook and Twitter pages.
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