Build a Solid Financial Plan

Build a Solid Financial Plan

30 Oct 2018

Contrary to what many common investors on the street generally believe, achieving your financial goals is really not such a cumbersome task. The cornerstone for achieving your financial goals is to create a solid & comprehensive financial plan that makes a clear distinction between your unrealistic dreams and realistic goals. Such a plan will tell you as to where you are likely to be financially, say five years, ten years and / or twenty years from the day you start your plan.

So, this brings us to the question - Do you have a financial plan? Well, if you don't, you need one at the earliest. Financial planning might sound complicated initially but it really isn't as long as you are aware of the key things that make up a solid financial plan and you get the help you need to establish a solid plan. Having a financial plan is basically your roadmap to wealth and it's important to have one in place because it will help you establish a pathway to becoming financially successful as well as protect what you build. Let us therefore explore this subject in greater detail.

1. Focus on creating financial goals

Having financial goals is the foundation for your financial success and you should start this planning as early as possible. Although there is no right age to start financial planning but ideally, you should start with your first salary. You have to know what it is that you want to accomplish in order to actually accomplish it. However, when it comes to setting up goals, you want to make sure your goals are well defined and prioritized accordingly and while it's great to have big lofty goals, you should break your goals down into smaller chunks so that you are not overwhelmed trying to accomplish them and it would be much easier to measure your progress.

A few common examples of life goals are: - Getting out of Debt completely, planning for an early retirement, creating multiple income streams, having comprehensive insurance to cover all life contingencies, children’s education and wedding, etc.

2. Always create a plan for long term investment

If you are serious about building wealth in the long-tem, you should put your money to work for you and this is where the concept of investing comes into the picture. However, before you put your hard earned money into any investments, it's important to have well-defined objectives which should include, what the investment is for, when you'll need your money by and what your risk tolerance is. You can create a plan based on your risk taking capacity / risk tolerance and divert specific funds to these areas. Remember the maxim – High risk, High returns and Low risk, Low returns. Investment in equities can give bigger returns but that can be highly risky too. You can always go through the SIP route in mutual funds, which are safer than direct investing into shares and secure. Have you heard the recent tagline? -“Mutual fund sahi hey”.

3. Insure your life and health with the right amount

After working so hard to earn your money and in your wealth creation journey, the last thing you want is an unplanned occurrence to wipe you out. Insurance is essentially your back-up plan that will protect your assets against the uncertainties of life. Your insurance coverage should include health, auto, disability, life, home or rental, business etc. Basically, you want to protect anything of major importance that has a high value to ensure that you and your loved ones are protected financially.

4. Create a plan for retirement

Retirement is certain, and equally certain is the fact that you would continue to live even after your retirement. Hence, the expenses will not cease to exist. Unexpected expenses could include a medical contingency, creating a safety fund to compensate for loss of a job, and so on. Hence, you need a retirement plan to meet these expenses. In order to have the lifestyle you dream of in retirement, you need to plan adequately for it. You'll need to determine how much you are going to need to retire, of course taking inflation into consideration, and how you plan to save and invest in advance for that period of your life.


5. Plan for taxes

Tax planning is imperative because it helps you smartly minimise the amount of income tax payable and hence have more savings. These savings can then be invested further for your future financial security. Annoying as they are, taxes on earnings are certain, and it's important that when you are making your long term income projections, your projections should include taxes, because not planning for taxes can impact your cash flows in a major way.

6. Purchasing a house or planning for it?

If you want to make money by investing in property, you need to first develop a plan. This plan involves analyzing your goals as an investor and your goals for the investment property. Asking yourself the following questions can help you put together a strategy for long term success. Estate planning is not something a lot of people like to think about, but is most critical as it allows you to determine exactly what happens to your assets after you are gone. It involves listing out all your assets, creating a will and making the will accessible to the people who need to have access to it. A financial planner or estate lawyer can help you set things up correctly.

7. Review your plan frequently

Once you have your financial plan outlined and churning along, it's important to review your plan frequently and make the necessary adjustments if your goals or the circumstances around your life change e.g. your insurance needs change, your risk tolerance changes, marriage, children, etc.

Achieve your financial goals by creating a financial plan that distinguishes between your unrealistic dreams and realistic goals. A plan that tells where you will be financially say five years, ten years and twenty years from the day you start your plan. A long lasting construction is possible only with a strong foundation.

Following are the basic things that can make or break your financial dreams whenever you are constructing a financial plan:

  • Investments & Savings – You should follow the exercise of assessing your current savings and investments which will help you understand and realize where you stand financially.
  • Future Savings Potential – Project your income and expenses till your assumed / possible age of retirement. This will enable you to analyze your savings methodically year after year till retirement. The net result of this exercise is that it will help determine where you can reach financially and how fast you can reach there.
  • Financial Commitments – Find out the approximate future value of goals once you list down these goals across a definite timeline. List down all the goals you are planning to achieve, when you are achieving each one of them and what would be the approximate future value of these goals.
  • Viability Check – Create a sound financial plan once you finalize the scenario that suits you best. Do not ignore the basics as this will weaken your financial plan. Do keep in mind to always pay attention to the basic things that can make the foundation strong and robust. A viability check helps you understand the gap between your realities and dreams.

To conclude, it is important to set and reach your financial goals. A long-term financial plan will help you reach your long-term goals and give a focus for your short-term goals. It can help you stop making financial decisions based on fear and emotions and help you determine the order of your major life steps. This plan will vary from individual to individual and a financial adviser can help you customize a plan, especially when you are ready to start investing. Once you are successfully following your plan, you may want to consider giving back to society through donations or volunteering. Your financial plan will help you make the best financial choices, so you can set yourself up to win financially by proactively managing your money

Founded in 2005 by new–age entrepreneur Abhishek Bansal, the Abans Group has evolved into a globally diversified conglomerate, providing expertise in Broking Services, Non-Banking Financial Dealings, Financial Services, Agri-Commodity Services, Warehousing, Realty & Infrastructure, Gold Dore Refinery & Manufacturing, Trading in Metal Products, Pharmaceuticals, Software Development & Wealth Management. The Group is a comprehensive financial and non-financial services and solutions provider, aiming to provide end-to-end solutions to its clients.