Come new year, and several individuals put their foot on setting the right resolutions for themselves. One such resolution which an individual could consider taking their finances into hand. Irrespective of an individual being rich or poor, it is never too late for an investor to sprout a financial plan for their financial well-being. In this article, we will understand how you can successfully create a financial plan to achieve your financial objectives.
- Create a budget
Creating a budget will help an individual understand where and how to spend their money. To get a clear picture on your expenses, you can assess and list your expenses for a considerable time, say 3 to 4 months. Tracking your expenses will help you to get rid of redundant expenses and increase your savings. You can consider asking yourself the following questions:
- Are you saving enough to cater to your retirement needs without compromising on your current standard of living?
- Are you saving enough to meet your short-term, mid-term, and long-term financial goals?
- How can you cut down on your expenses?
- How can you completely get rid of debt?
- Plan for big-ticket purchases
Are you planning to buy a new house or maybe a new car? Or perhaps you wish to save for your child’s higher education or even their marriage. Or perhaps you wish to save enough to live a comfortable life post retirement. Determine the costs needed to achieve these goals. If you do not already have the finances to meet these goals, create a timeline and plug the expenses into your budget. - Create an emergency corpus
An individual must always be mentally and financially prepared for any situation that life throws their way. It’s always a good idea to be prepared for the worst or any contingency that comes their way. A good thumb rule is saving at least three to six months of an investor’s living expenses. An investor can choose to invest in these savings in highly liquid instruments such as liquid funds. - Invest
After understanding your risk appetite, financial goals, and investment horizon, choose the types of investments that best suit your investment portfolio. There are different types of mutual funds available to an investor that can help them cater to their varying financial objectives. If your goal is to simply create wealth or preserve your wealth or save tax, there are different investment options suitable for these goals. - Review your investment portfolio
Your job as an investor does not end at investing in the right types of investments or choosing the right fund manager or the fund house that will invest in mutual funds on your behalf. You also need to review your financial portfolio on a periodic basis. Regular reviewing of your portfolio will help you to distinguish under-performing assets and take the necessary investment decision as required.
If you are still unsure about any investment decision or need help in creating a financial plan, you can avail of the services of a financial expert. Happy investing!
