Frequently Asked Questions

Financial planning is the process of managing your finances to achieve personal economic satisfaction and goals. It is important because it helps individuals set financial goals, manage income, save, invest, and prepare for future financial needs. Financial planning ensures financial security and helps in achieving life goals such as buying a house, funding education or planning for retirement. 

Effective financial goals should be Specific, Measurable, Achievable, Relevant, and Time-bound (SMART). Identify what you want to achieve (short-term, medium-term, and long-term goals), quantify it, set a realistic timeline, and ensure the goal aligns with your overall financial situation and life objectives. 

Start by tracking all your income and expenses to understand your spending habits. Create a budget that prioritizes essential expenses, limits discretionary spending, and allocates funds for savings and investments. Automate savings to ensure consistency, and review your budget regularly to adjust as necessary. 

Common types of investments include equities (stocks), mutual funds, fixed deposits, Public Provident Fund (PPF), real estate and gold. The choice of investment depends on factors like risk tolerance, financial goals, investment horizon and market conditions. Diversification is key to managing risk and achieving balanced returns. 

A general rule of thumb is to save at least 15-20% of your income for retirement. However, the exact amount depends on factors like your current age, retirement goals, expected retirement age, lifestyle expectations, and other financial obligations. It’s advisable to consult a financial advisor to determine a personalized retirement savings plan. 

In India, tax-saving options under Section 80C include investments in PPF, NSC, ELSS, life insurance premiums and fixed deposits. Health insurance premiums are deductible under Section 80D and interest on a home loan can be deducted under Section 24(b). Proper tax planning and utilizing all available deductions can help reduce your tax liability. 

(Note - These exemptions may vary year on year basis)

Start by creating a list of all your debts, including interest rates and repayment terms. Prioritize paying off high-interest debts first while making minimum payments on others. Consider consolidating debts for easier management and lower interest rates. Avoid taking on new debt and maintain a good credit score. 

Essential types of insurance include life insurance (term insurance or endowment plans), health insurance (for medical emergencies and critical illnesses) and general insurance (such as home, vehicle, and travel insurance). Insurance provides financial protection against unforeseen risks and helps maintain financial stability. 

Regular review and monitoring help ensure that your financial plan remains aligned with your changing life circumstances and goals. It allows you to make necessary adjustments to your budget, savings and investments, re-balance your portfolio based on market conditions and stay on track toward achieving your financial objectives. 

Consider consulting a financial advisor when you have complex financial needs, are nearing retirement or need guidance on tax planning, investments, or estate planning. Choose a financial planner with a good reputation, relevant experience and a transparent fee structure. Ensure they are aligned with your financial goals and risk tolerance. 

Common mistakes include not having an emergency fund, over-reliance on a single type of investment, ignoring inflation, lack of proper insurance coverage and unplanned retirement savings. Avoiding these mistakes can help ensure a more secure financial future.