Personal Financial Plan the best thing to avoid financial crises
A wisely constructed personal financial plan is not only the basic need but also the best thing to avoid financial crises in near future. Regarding your personal finance, a wisely constructed personal financial plan will always act as a backup in your financial journey and will always help you in crisis by getting you up on the track.
Following points should be kept in mind while creating a good financial plan:
Set Goals: The first and the most important step in creating a personal financial plan is to understand and define the financial goals that you want to achieve. Your financial plan will get its base through setting up your goals and understand for what are you saving for. Regarding this, goals must be as specific as you can make them and can further divide into two sections like short-term goals which can include buying a car or planning a family vacation and long-term goals like how and when you want to retire.
How much money and when: The second important step in creating a good personal financial plan is to not only know about how much money you will need in upcoming future but when will you need them so that you can invest accordingly depending upon the required amount at a particular time.
Understanding your risk appetite: While constructing a financial plan You should need to understand your risk boundaries like how much you can risk upon. This depends on your age, current liabilities, net worth and dependents.
How to invest: According to your risk boundaries, you can invest in the debt funds, mutual funds, a stock market, real estate, fixed deposits etc.
Points to be taken cared of once your financial plan is ready
Tax impact: While rules and regulations regarding tax keep changing all the time, therefore, its impact can leave a cut in your savings. In order to avoid these kinds of situations, you need to be very careful at the time purchasing and selling any investment product which has a tax implication on them, as these may reduce the returns on your investments.
Emergency fund: To keep your financial plan on the track you must keep aside a certain amount of money, like six months of your salary or business income, as an emergency fund. This kind of emergency fund will not only help you to keep your financial plan on track but will also protect you from various emergency situations like a medical emergency or other unexpected expenses. This figure may vary depending on your job or business.