Financial Planning for Beginner

Financial planning is a step-by-step approach to meet one’s life goals

Financial planning is the process of meeting your life goals through the proper management of your finances. An individual has various short-term as well as long-term goals such as buying a house, car, television, refrigerator, washing machine, etc., and saving for children’s education, marriage, retirement, etc. A financial plan acts as a guide as you go through life’s journey. It is very essential to have an adequate financial plan to fulfill your life goals without any stress. A financial plan helps you give direction and meaning to your financial decisions. It allows you to understand how each financial decision affects other areas of finance.

Viewing each financial decision as part of a financial plan might help you to consider the long-term and short-term effects on your life goals. This will help you feel more secure and more adaptable to life changes once you can measure that you are moving closer to the realization of your goals. A financial plan predominantly consists of four categories such as insurance planning, investment planning, retirement planning, and tax and estate planning.

Your financial plan should have adequate insurance to insure yourself and your family against any unfortunate event occurring in the future. An investment plan will help you to fulfill your long-term as well as short-term life goals and will help you in saving at regular intervals. A retirement plan will aid your sunset years to be stress-free. A tax plan helps an investor in earning tax-efficient income while estate planning is the process by which an individual or family arranges the transfer of assets in anticipation of death or incapacitation. Let’s look at each of them in detail.


Insurance Plan

We live in a risky world. Forces that threaten our financial well-being constantly surround us and are largely outside our direct control. Some people experience the premature death of their near and dear ones or the loss and destruction of their property from both manmade and natural disasters. So, it’s very much necessary to protect our financial well-being by insuring against any occurrence of an unfortunate event. Insurance is transferring the risk from an individual to a company and reducing the uncertainty of risk via pooling.

✓ Life Insurance: This will protect the insured’s family against any financial crisis in case of the unexpected death of the insured.
✓ Health Insurance: One should possess adequate health insurance for one’s self as well as family members in case of any health issues arising in the future.
✓ Personal Accident Insurance: Personal accident insurance will protect the insured financially against any unfortunate crisis arising due to an accident. This type of insurance covers an individual against death or partial or permanent disability arising due to an accident.
✓ Property Insurance: An individual may possess various kinds of property which might face uncertainty and cause loss. So, to secure one’s self against any financial crisis, one should possess adequate property insurance.


Investment Plan

Smart investment is very essential to make our financial life better. It will help in providing us with enough funds to make our dreams come true. Traditionally, Indian investors have always preferred fixed-income instruments as they provide safe and assured returns. Investment should be able to create higher returns on your investment portfolio which can help you come closer to your financial goals. A proper investment plan is required to build higher capital with higher returns for better stability over a longer period. Following are some fundamental rules of investments:

• Start early
• Invest regularly
• Spread Investments


Retirement Planning

Retirement planning is extremely important because the quality of life for a large part of the later years depends on the kind of retirement planning undertaken. This is one of the areas of planning that deserves a closer look, and hence everyone should be looking at effective ways to plan well to enjoy life after the hard work put in during the best years of one’s life. Retirement planning is the process of undertaking financial planning to provide for the period after one retires from work. This means the process of saving and building up a corpus that is invested in various asset classes that will result in income and earnings for the individual over some time.


Tax and Estate Planning

Tax planning is the process of analyzing a financial plan or a situation from a tax perspective. The main purpose of tax planning is to make sure that there is tax efficiency. You can create wealth efficiently by investing in investment vehicles that offer tax benefits. Tax planning involves applying various advantageous provisions which are legal and entitles the assessee to avail of the benefit of deductions, credits, concessions, rebates, and exemptions. A plan that minimizes how much you pay in taxes is referred to as being tax-efficient. Tax planning should be an essential part of an individual investor’s financial plan.



It’s rightly said that “if you fail to plan, you are planning to fail”. You may have various financial goals you wish to fulfill but they are only achievable at the right point in time if you have a proper financial plan right from a young age. Formulating a financial plan can be a tedious task for the common man and most people take the help of professionals who can prepare and monitor their financial plan. They can be the right professionals to also help you in selecting the right type of investment option.