Financial Plan

4-Baby Steps Towards the Financial Plan

We earn salary every month which gets accumulated in our saving bank account after spending on household expenses and paying on our loan installments (if any). Sometimes we start keeping money in Fixed Deposit (FD) one after the other; according to many of us this is the best investment option which one should take, unmindful that our principal amount is losing money…A Big Thanks to Inflation!!

Usually during the period of January to March our focus shifts towards tax saving schemes and under guidance of our beloved friends, family member or an agent we buy some worthless life insurance without even evaluating the return which we will get in respect to inflation. And one day when we wake up we realize that our finances are in complete mess and We Start Worrying. But it should not be this way; we all can plan our finances in an efficient manner. Below are the four baby steps which one should take to improve his or her financial life:

a.) Online Term Plan: If you have dependents, you should buy one Term Plan. It will help your family in case you are no more with them. The term plan is far better than the normal life insurance policy which charges high premium with very low return and small amount of life insurance. On the other hand term plan will charge you very low premium and will give you a cover of high amount. It is recommended one should go for term plan with amount around 10 times of his or her salary.

b.) Saving and Investing: By nature, we all are fond of spending. We love spending our hard earned money on trivial items. We love to buy big car, big house, good clothets, good jewellery etc. Why we are not fond of saving and investing the same, life is not sprint its a marathon. We should at least save around 50% of our salary and invest it cleverly so we can earn better return and can multiply our money subsequently.

If one wants to calculate EGO; he should subtract his savings from income. Now your expense in term of percentage with your income is your ego.

c.) Find your own Tax-Bracket: If you are in the 20%+ tax bracket, saving on taxes is critical. Investing Rs. 1.5 lakh every year on Equity Linked Saving Scheme (ELSS) can give you really good returns. There are other tax saving option also available but I would like you to go with ELSS only.

d.) Health Insurance: Own a Health Insurance?? If yes, you did a great job but if you don’t possess you should take one immediately. It will help you & your family financially and emotionally at the time of emergency.

The above 4 baby steps are very simple to follow but at least 80% of savers are still not doing this. Don’t become one of them.

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Happy Investing!!

Vikas Agarwal
the authorVikas Agarwal
Vikas Agarwal is an IIT-Varanasi graduate in Chemical Engineering. He is the Founder and CEO of Finaacle.com - an investment advisory website. He is a Business Development Professional but a Value Investor at heart. He writes articles on Finaacle, which focus on simplifying the art of investing and the causes of human misjudgment when it comes to investing. He also shares his experiences as an investor and lessons from some of the greatest investors of all time.

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