Nowadays, it has become crucial for you to plan your finances in advance. It is the only way to achieve your goals while keeping your future secure financially. However, your financial planning will be of no use if you don’t cover all aspects of it. That is why you should first learn about the five essential kinds of financial planning recommended by The Financialist. So you won’t ever fall short of funds for any purpose in life.
#1 Investment Planning
Investments are an inevitable part of anyone’s life. Each person has to put their money into some sort of investment so that it will grow with time and will be of use even after inflation. The only problem here is that people often get confused between savings and investments. You shouldn’t make this mistake.
While saving means cutting out on expenditure and keeping money aside, investing your money means putting it into some assets to grow with time. For the latter purpose, you need to use various financial instruments. Therefore, in investment planning, you need to go through all available tools and see which one fits the best according to your financial situation.
As investments also bring in risk, your risk profile has to be determined for better planning. You can always take professional help if all this seems complicated to you.
#2 Tax Planning
When you have income, you will have tax, simple. However, there are some secure ways in which you can minimize your taxable income to reduce the overall payable tax amount and save more money. This can only be possible if you plan effectively. Under tax planning, you have to seek out legal and efficient methods to save on tax.
This aspect is also linked to the previous one because specific investment options help you get tax exemptions. That is why you need to look into all possible techniques to minimize your tax liability and save more for other purposes. Remember, you must remain careful here because even a little mistake can lead you to severe legal trouble. It will be best if you get professional assistance for the same.
#3 Insurance Planning
Whether you are the sole breadwinner of your house or not, having the correct insurance is vital for you. It helps in securing your family’s future if you leave them in uncertain situations. Insurance planning here means comparing the premium amounts of available insurances with the coverage offered by them.
This way, you can opt for the most suitable insurance according to your individual requirements. Plus, the premium won’t cost you a fortune. So you will be able to live your life to the fullest without stressing much about your family’s financial future. They will be safe in all cases.
#4 Retirement Planning
Retirement brings in a number of changes in your life. Where you won’t have to go to the office every day, your regular income will also be reduced or halted. Hence, you must opt for retirement planning if you want your “after 60” life to be peaceful and stress-free. Under this aspect, you will be able to plan for your life goals after retirement according to your present financial circumstances.
Some people rely on their small savings and investments for their after retirement expenses. You shouldn’t do that and opt for appropriate retirement planning so that you won’t face any challenges later in life. For this, you can either follow a retirement planning guide or seek out professional help for the best solutions.
#5 Debt Planning
Loans and credit cards have made it easy to live the life of your dreams. But they also have the power to leave you financially drained if you don’t plan them properly. This aspect isn’t precisely debt planning. Instead, it is more of debt optimization, where you need to streamline and manage your debt so that your financial health can improve.
Generally, a few strategies are followed under debt planning. These include:
- Pay off high-interest debts with more efficient options.
- Seek out a debt consolidation loan.
- Pay your regular EMIs on time.
- Restructure your loans and other debts.
In short, your existing debt gets reorganized here in a way that you won’t be paying off your entire income into monthly EMIs. You can always take some professional help if all this seems too confusing to you.
Your financial planning should begin as early as possible in life. This way, you will be able to secure more money for you and your family’s future when your liabilities are minimal. However, you must consider all these kinds of financial planning to ensure that you don’t face any challenges throughout your life.
You can also look out for professional financial planners. Being the expert of the domain, they can guide you better than anyone else. Moreover, they will look into your individual requirements to provide customized solutions. Therefore, you shouldn’t hesitate to get some help from them.