Happy new financial year!
We are a week into the new financial year. For the small section of people who are not aware, a financial year runs from 1st April every year to 31st March of the next calendar year. The beginning of the financial year could be the perfect time to plan for the year ahead and for the long term. Here is a checklist of important things to start with.
Build your retirement nest egg with VPF
If you are in your 20s or 30s and try to use some of the “calculate how much you need on retirement” tools available online, the result is an unbelievably large sum; with the effect of inflation and time factored in. And any financial planner would tell you that the only way to save this kind of money would be to save wisely and regularly, take calculated risks and invest in a proportion of equity and debt according to your age, profile, line of business etc.
The voluntary provident fund or VPF is one of the best options which should form the fixed income / low risk category of your retirement planning portfolio.
Estate Planning – Creating a trust
The previous post was about making a will, which is the most basic form of estate planning. But in certain cases, a will has its own limitations and it not sufficient to efficiently distribute one’s estate. This is where a trust comes into the picture.
Estate Planning – Preparing a will
Till a few years back, people used to feel uncomfortable discussing inheritance and estate planning issues and hence tasks like preparing a will etc. were postponed for the future till the time it became inevitable to do so. Not anymore. Clients are now aware of the fact that postponing the inevitable only makes the job difficult; and the difficulties the family would have to face in absence of a will if the breadwinner were to die all of a sudden. As a result, today most of the certified financial planners have included estate planning in their scope of practice.
Planning for Immediate Goals
When we talk of financial planning, it is mainly about goal setting, saving and planning for the future. But, sometimes reaching certain key milestones in our life like marriage may require a complete re-working of our finances- planning for our immediate goals. Let us take Aryan’s case to understand this better.
Handling sudden wealth/windfall gains successfully
Most people spend the prime of their life working hard to earn money for their immediate goals and saving for a financially secure future. A few fortunate ones happen to suddenly receive a huge sum of money – the most common sources being by winning a lottery, settlement of some legal suit, inheritance or selling off some ancestral land.
Such unexpected windfall gains are not easy to deal with, especially emotionally and require careful planning.
Plan your investments like how you would plan for that much awaited holiday.
The holiday season is around the corner with the schools about to break for summer vacations. Most families are ready to embark on that much awaited trip which has been eagerly and meticulously planned. Believe it or not, managing your finances which is perceived to be a complicated affair in fact requires just the same kind of planning!
- What should be the destination?
Your investment objective – First you have to decide what are the milestones you have to save for – like buying a house, childrens’ education and marriage or retirement.
- How long should your trip be?
Your investment horizon – This would mainly depend on the investment objective and factors like the age of the investor, details of his dependents etc.
- What should you pack?
The type of investments you should make in various avenues like equity, debt schemes, govt. securities. This would be determined by the person’s personal risk appetite, his age, current job profile and the investment horizon. Any investment plan you choose is a trade-off between risk and reward. Greater the risk you are willing to assume, higher the reward.
- How much would this trip cost?
How much money would you have to save regularly/set aside to reach your desired investment objectives.
- How much cash should you carry along with you?
Your short term liquidity requirements – Though liquid investment schemes like a savings a/c is very convenient as cash can be withdrawn immediately, these have a much lower yield compared to less liquid investments. Hence it is advisable to just keep the amount which you might require in an emergency as cash.
- Is your holiday likely to get extended for some reason?
Most people form a rough idea of how long they are likely to live based on the average life span. It is important to keep in mind and provide for the risk of running out of savings if one lives too long.
Sriraksha Financial Planning Services 