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Financial Planning

The document provides 4 crucial financial planning tips for salaried individuals: 1. Save as much tax as possible by utilizing various tax saving options like Section 80C, medical insurance, education loans, etc. Even small amounts of tax savings annually can grow significantly over time. 2. Protect your family's finances by insuring against loss of income through accidents or death by purchasing term insurance and personal accident policies. 3. Know your financial goals by creating a goal calendar that outlines specific goals, target amounts, timelines, and assumed inflation rates to stay on track. 4. Understand how to utilize loans effectively and avoid predatory lending by only borrowing what is affordable and building assets rather than debt

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Jasmeet Singh
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87 views2 pages

Financial Planning

The document provides 4 crucial financial planning tips for salaried individuals: 1. Save as much tax as possible by utilizing various tax saving options like Section 80C, medical insurance, education loans, etc. Even small amounts of tax savings annually can grow significantly over time. 2. Protect your family's finances by insuring against loss of income through accidents or death by purchasing term insurance and personal accident policies. 3. Know your financial goals by creating a goal calendar that outlines specific goals, target amounts, timelines, and assumed inflation rates to stay on track. 4. Understand how to utilize loans effectively and avoid predatory lending by only borrowing what is affordable and building assets rather than debt

Uploaded by

Jasmeet Singh
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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4CrucialFinancialPlanningTipsForSalariedIndividuals(31Jan2012)

Formostsalariedindividuals,financialplanningbeginsandendswithtaxsavinginvestments.
AsaregularreaderofPersonalFN,youknowthere'smuchmoretoitthanthat.
Whilesavingtaxisaverygoodthing,thereismuchmorethanyoucandoasasalariedpersontohavea
completelysuccessfulandstressfreefinanciallife.
Let'sseewhatthe4mostimportantthingsareforsalariedindividualstokeepinmindatalltimes,startingof
course,withmakingthemostofyourtaxbreaks.
1.SaveasMuchTaxasPossible
Therearemanyoptionsavailablethatwillhelpyousavetaxandalsogrowyourwealth,letsbrieflygo
overwhatthemainonesare:
a.Section80C
EverybodyknowsSection80C.
It includes your EPF, PPF, tax saving mutual funds, premiums paid for life insurance, ULIP
premiums,repaymentofhomeloanprincipal,5yearBankFDsandmore.Formoreinformationon
eachofthese,readourarticletitledTaxSavingUnderSection80C
b.BeyondSection80C
ThisincludesSection80D(healthinsurancepremium),80CCF(infrastructurebonds),80E(Eisfor
education,soifyouhaveaneducationloanforyourselforafinancialdependent,thissectioncan
help you), HRA (House Rent Allowance living on rent? it can help you save tax), LTA (Leave
TravelAllowancetakenaholidaythisyear?thiscansaveyoutaxtoo),MedicalReimbursement
(uptoRs.15,000peryearisreimbursedsohaveyourmedicalbillsreadyasproof),andmore.For
moredetails,readourarticletitledEasyTaxSavingTipsBeyondSection80C
Taxsavingcangoalongwaytohelpingyoubuildwealth.
EvenRs.25,000savedintaxeseachyearfor20yearswillgrowtoRs.25.61lakhs.
(assuminginvestmentsearna15%perannumreturn)
2.ProtectYourFamilyAgainstLossofIncome
Chancesareyouarethemainbreadwinnerinyourfamily.
Considerwhatwouldhappenifonedaytheincomestopped.
Thiscouldbebecauseofjobloss,oranaccidentduetowhichyouneedtostopworkingforawhileand
during which time you will incur medical expenses, or an unfortunate event in which you pass away.
Youneedtoprotectyourfamilyfromthefinancialrepercussionsofanyoftheseevents.
Nobodycancompletelyprotectthemselvesfromjobloss.Butwhatyoucandoisconstantlyupgrade
yourskills.Themorequalifiedandalsothemoreexperiencedyouare,theeasieritwillbeforyouto
takeyourpickofthejoboffersyouwillreceive.
Theremaining2factorscanbeinsuredagainst.
Ifyousufferanaccident,youcanprotectyourselfagainsttotallossofincomeifyouhaveaPersonal
Accidentpolicy.
APersonalAccidentpolicyisonewhichprovidesyouwithweeklyincome(insomecaseslimitedtoRs.
5,000perweekfor104weeks)incaseofanaccidentalinjuryresultingintemporarytotaldisablementor
death.Differentpoliciesofferdifferentcompensationamountsandeachpolicyshouldbereadcarefully
beforeanyoneisselected.This,inconjunctionwithenoughhealthinsurance,willhelpfootmostofthe
medicalbillsduringyourperiodofrecovery.Thusyouwontcompletelyloseyourincome,andalsoyou

wonthavetospendtoomuchonmedicaltreatment,asyouwillbeinsuredatbothpoints.
In the final case, where you pass away due to an unfortunate unforeseen event, your family will be
protectedifyouhadtheforesighttotakesufficientterminsurance.
3.KnowYourGoals
HereisabasicexampleofMr.A'sGoalCalendar:

Year Age

Goal

Amount
required

Assumed
Inflation
p.a.
Not
Applicable

FutureValueof
Goal

2012

35

ContingencyFund

Rs.5,00,000

Rs.5,00,000

2015

38

HousePurchase

Rs.1,00,00,000

10%

Rs.1,33,10,000

2030

53

Child'sHigher
Education

Rs.10,00,000

10%

Rs.55,59,917

2037

60

Retirement

Rs.5,00,000
p.a.

8%

Rs.6,90,28,321

Untilyouwritedownsomethinglikethisforyourself,youwillneverfullybeawareofwhatexactlyyou
aresavingfor.Onceyouhavethistableandyouknowallyourgoals,youwillhaveaclearsenseof
directionandpurpose,andwillbeabletoefficientlygetontracktoachievingyourdreams.
Different goals can have different rates of inflation, and in some cases you might need professional
assistancewithknowingyourfuturegoalamountandfindingouthowandwheretoinvesttoachieveit.
You might also need assistance with cash flow management. Your financial planner will give you a
holisticpictureofyourfinancesandgiveyouaclearroadmapofyourgoalachievementprocess.
4.UnderstandHowLoansWork
Therearegoodloansandtherearebadloans.Goodloanshelpyoubuildorbuyappreciatingassets
(homeloansforexample).Badloanschargeyouveryhighinterestandeitherdon'thelpyoubuyassets
atallorhelpyoubuydepreciatingassets(personalloans,creditcarddebtandsoon).
Loanscanbeagreattooltohelpyoubuildwealth,butbesuretousethemwisely.Predatorylendingis
whenabankloanofficialtellsyouthatyoucanaffordacertainhighloan,whenactuallyyoumightnotbe
able to. You as the loan taker are happy about being eligible for a higher loan amount because this
meansyouhavemorefundsatyourdisposal,butwhentheinterestraterisesandyourEMIgoesup,
youmightfindyourselfstrugglingundertheheavierburden.Onlytakeasmuchofaloanasyoucan
afford and always remember to have atleast 36 months worth of EMIs as part of your contingency
reserve,justincase.Also,tobetterunderstandyourselfasaloantaker,readourarticletitledHowTo
BuildYourWealthWithaLoan.
Conclusion
These4pointsarebothsimpleandcrucial.Followthemandyouwillbewellonyourwaytohavingahappy
and successful financial life. If you need professional assistance, feel free to call PersonalFN, we'd be
happytohelpyouplanyourfinances.

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