People these days are well aware of the importance of investments. They also make sure to invest their money in different schemes. However, what people fail to understand is that without a goal or a proper investment objective, their investments solve no purpose.
Investing is a broad portfolio without proper calculations or goals might not fetch the returns that you expect and you might even end up with losses in some of your investments. This can be corrected by approaching investments in a systematic manner. Here are 5 important aspects that you need to consider before you start investing.
Goal
It is imperative to know and understand your needs and what you would like to achieve in the financial front. Setting up your long term and short term financial goals will be your starting point of financial planning. Always remember to make accommodations for inflation when planning for your financial goals.
Insurance
The most important aspect of financial planning is insurance planning. Always remember not to mix insurance and investment. It is recommended that one opts for a Term insurance plan to get the right cover at a better rate.
Medical insurance cover is also equally essential. This will help to take care of the expenses during medical emergencies.
Tax
The next step in financial planning is to plan for your taxes as this will reduce the money outflow in the form of tax deductions. There are a lot of good options available to reduce your tax under 80C. Apart from this, one can receive an additional tax benefit of up to 50,000 through NPS investments under section 80CCD.
Expense
Budgeting and expense tracking are two things that people either fail to do or they do not consistently maintain. It is very important to frame a budget and keep track of your expenses. This will help you to cut down on unwanted expenses and improve your savings/ investment. As a thumb rule, the expenses should not surpass 40% of the total income.
Retirement
Though people understand the importance of planning for their retirement, it is ignored for the most part of the earning phase or compromised for achieving other financial goals. It is very important to plan and start investing for your retirement. The retirement corpus that you accumulate has to cover for nearly 15-20 years of no income phase of your life.
It is not enough if you understand and follow all the above aspects of financial planning. You should ensure that before investing you research extensively about the option that you are choosing and then invest. It is a good choice to get assistance from a professional rather than doing it all by yourself. So, get in touch with your financial consultant today to design and execute a successful financial plan.