A Step-By-Step Guide On How To Create Your Financial Plan for Beginners
Thinking of investment and financial planning is a good start for a financially better future. Here’s your step-by-step guide on how can you create your financial plan.
Step #1 Of Financial Planning – Get A PAN Card
First things first! PAN Card is your ID issued by income tax department. A PAN Card is very essential in filing your Income Tax returns, bank account, Demat account, mutual funds and other savings and investment accounts.
All you need is a passport size photo, address proof and an identification proof to get your PAN Card. You can either apply with either UTI or NSDL; they are the two approved agencies by income tax department for issuing PAN Card.
Setting your financial goals is very crucial for a successful financial future. Write your financial goals, prioritize your financial goals, and plan accordingly.
Step #3 Of Financial Planning – Plan Your Protection
Getting yourself insured is a must in today’s time be it through personal accident insurance, disability insurance, or term insurance. Insurance policies will cover the financial losses arising out of accident or disability. You need to determine your life worth, and the coverage amount of this policy based on the estimated loss you and your family may suffer because of accidents.
Step #4 Of Financial Planning – Plan Your Health Insurance
Most people don’t take health insurance as a priority. However, when a loved one is sick, health insurance ticks the mind first. Health insurance financially prepares the insured to pay the medical expenses in case of severe and serious illness. However, it is important to understand whether the sum of your health insurance is sufficient, whether your family/dependents is/are covered under your health policy or not.
Step #5 Of Financial Planning – Money Multiplication
After protection comes money multiplication. The whole concept of financial planning and investment planning is to be financially equipped to fulfill all your financial goals like child education, their marriage, emergency reserve, retirement planning, etc. Apart from these financial goals money multiplication or wealth creation is also one of the major financial goals.
Step #6 Of Financial Planning – Creating Emergency Reserve
Once you have planned your finances for the above obligations, you need to create your emergency reserve. This is one of the important aspects of financial planning i.e. planning for situations where there could be a temporary break in your source of income due to ill health or probably job switch etc.
This emergency fund extends financial and psychological security to say around 3 to 6 months.
Step #7 Of Financial Planning – Tax Planning
One of the important aspects of financial planning is tax planning, which is often overlooked by many. You can save a huge amount by getting tax exemptions through your savings like investments in NSC, PPF, insurance premium, and ELSS Mutual Funds.