There’s no denying the fact that financial planning is a meaningful and a doable task at almost all stages of life. It becomes even more important for the salaried employees who have a fixed and finite number of resources for generating income. A large portion of their income is derived from their monthly salary. With a simple and structured approach, one can be efficient and effective moneywise in financial planning.
We have ranked the suitable plans that can help in building a reliable corpus of finance for your future, in this order-
1: Retirement Plan
Your planning for retirement should, typically, begin long before you hit your middle-age. Very few people know this, but the minimum entry age of buying a retirement plan with ICICI Prudential is 35 years. The objective is to keep your funds invested in a market linked plan and give you returns on maturity, when you need financial backing during your retirement. It’s a safe and reliable option, as a plan like ICICI Pru Easy Retirement gives you assured benefit. It ensures that you do not lose the money you invest.
2: Child Education Plan
Every parent wants to give a secured future to their kid, make sure his/her education continues smoothly, and lay down a strong foundation for his/her career and life. A child education plan like ICICI Pru Smart Kid offers benefits such as premium waiver, lump sum secured amount in case of your demise, and tax exemptions.Such a plan can be a major contributor to your financial objectives of funding your child’s education, his higher studies and other needs.
3: Market Linked Investment Options
Market Linked Investments may seem difficult to understand at first, but plans under them give a lot of flexibility, control and most importantly, high returns. New-age market-linked plans such as ULIPs give a more significant advantage with their flexibility to spread your investment across equity and debt funds and make sure that you have the flexibility to switch funds as per your understanding of the market. They increase your chances of gains and are a good source of building your wealth.
4: Health Insurance Plans/Mediclaims
Health Insurance plans or mediclaims give a lot of support during hospitalisation, and sufficiently covers hospital related expenses. Besides health plans, critical illness plans cover more than just your expenses and reimbursements. They provide a lumpsum payout on diagnosis of diseases to make the best treatment possible.
5: Term Plans
Term plans top this list as they mainly provide a life cover to the investor. Imagine what would it be when all your investments are secured, but you aren’t. Term plans give a safety net to you and secure your family financially in the event of your demise. It acquires significance because of the substantial amount of cover it can provide for relatively cheaper premiums. It becomes the only plan which can truly cover the financial impact of an unfortunate demise of the family’s breadwinner. Term plans like ICICI Pru iProtect Smart also provide you cover from 34 critical illnesses which can come to your rescue in your lifetime.
Things you should consider in Financial Planning:
Financial planning is the key to financial freedom. A proper financial planning can help you identify the right places to invest in and, at the same time, keep you from making unnecessary expenses. A financial plan can help you meet your long-term goals. In order to achieve your goals, celebrate your milestones, and be prepared for any financial emergency, here are some financial planning tips you can consider:
Manage your money:Managing your money is the first step towards a successful long-term financial planning. You should always be in control of your expenses. Tracking your expenses is the first step towards this process. This will help you understand how much you spend on your needs and how much goes into unnecessary spending. The best way to keep track of your spending is to allocate a monthly budget. A budget ensures that you limit your spends, which further ensures that you save enough for your long-term financial goals.
Save early:Saving from an early age can give you a huge advantage. It not only helps you set aside an amount for your investments but also provides enough time for your money to grow. Saving regularly helps to develop a sense of discipline. It also helps you meet your financial goals and enables you to stay prepared for any financial emergency.
Manage your borrowings:Borrowing money or taking loans may seem to be a convenient option when you need money. However, fulfilling your financial needs with borrowed money can tempt you to borrow more. This can create a huge financial burden on you. Always try and keep borrowing money as a last resort. Instead of using a credit card for purchases, choose to find something that fits your budget and pay with cash or a debit card. Try to limit your expenses within your budget and clear off your loans as soon as possible.
Plan your taxes:Tax planning is an important aspect of financial planning. A proper planning can help you save the taxes you pay to the government. The Government of India provides options to save taxes on your hard-earned money. You can avail this option by investing in certain financial instruments such as life insurance plans, health insurance plans, and more.
Health insurance plans provide tax* benefit of up to ₹ 7,800 in a year under section 80D of the Income Tax Act, 1961. The premiums you pay towards life insurance plans are eligible for deduction under section 80C* up to ₹ 1.5 lakh every year. The amount you receive at the end of the tenure of the plan is also tax-free* subject to conditions under section 10(10D).
Assess the Risk Factor:The width of your investment portfolio depends on your propensity to take a risk and the external risk affecting each of them. One of the key financial planning tips is to manage your risk as well as analyze your risk appetite. Additionally, the life stage you are at also should matter when choosing your investment plans. As you grow in life, your family expands; your financial priorities alter accordingly, making your risk taking ability to change too. A 38-year old adult’s financial planning will be more secure and less risky owing to the life situations and responsibilities entailed by middle age, as compared to a 25-year old adult.
Emergency funds:An important aspect about financial planning is to have enough amount set aside for emergencies. An investment only has higher expected returns when you don’t liquidate them sooner. It’ll require you to be invested in your options for long. But since you also have to cater to your emergency needs, make sure, your portfolio gives you that freedom. Like, in a child education plan by ICICI Prudential, you can make an emergency withdrawal from your funds in case such a need arises. Additionally, it also has a premium waiver benefit wherein all future premiums will be waived off in case of your demise, giving your spouse and child a burden-free life.