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​Tips for effective financial planning​

If you are just getting started with financial planning, these may be some doubts that fog your mind-

Having questions is always a good place to start with because it implies that you may be looking for solutions. The relevant thing to note here is how financial planning is not a one-day or a one-week job; it is almost a continuous process.

So, let us make a start and look some of the basic steps you may want to take, to get started on this journey towards efficient financial management.

1. Set Your Goals

No matter what life-stage you are at, there ought to be some life-events you may require planning for. Based on how far you are from achieving your goals, they can be classified as-

Long-term goals: These are goals like your retirement planning or your child’s higher education/marriage, which are 8-10 years away or beyond.

Mid-term goals: Goals like buying an expensive car of your choice, making a down payment of a new house or starting a second career can be your mid-term goals with a horizon of 3-7 years.

Short-term goals: Short term goals are goals such as planning your next vacation, provisioning for your marriage etc. which have a time horizon of 1-3 years.

Once you know what you are planning for, choosing the methods of investments and savings becomes easier. Also, it is recommended you start from the most fulfilling goal when it comes to planning investments against them.

2. Ensure you have adequate Health Insurance

With a steep increase in medical costs, buying a health insurance policy that adequately covers you and your family, may be the need of the hour. You can choose the policy that fits your requirement; for example, there are policies specifically designed for senior citizens and critical care diseases like cancer, dialysis, etc. A health insurance policy helps you in reducing your out-of-pocket medical expenses, and you can look at saving that money for future goals. The premium paid also has a tax benefit under the section 80D of The Income Tax Act, 1961.

3. Ensure you have enough Term Life Insurance

While health insurance is bought for a medical emergency for yourself and/or your family, a life insurance policy is bought for the financial security of your loved ones in case of your unfortunate demise. A term life insurance policy is a pure life insurance policy with relatively lower premium amounts and higher cover. A term policy’s premium amount has a tax benefit under the section 80C of The Income Tax Act, 1961.

4. Plan a budget and stick to it

It is a relatively common mistake to invest the money that you are able to save in a month rather than having a saving budget and spending only the amount that has been left over after the investment. It can be a good start to note down your monthly earnings, expenditures & existing investments, and try to eliminate the unnecessary expenditures in order to be able to save more.

5. Do proper Tax Planning

The first step here may be to understand your tax liability by checking which tax bracket you fall into. Further, when you are investing, it is advisable to invest in tax-saving avenues that help you with an aim to optimize your returns as well as help you save taxes. For example, the Equity Linked Savings Scheme ​offers you a tax benefit under the section 80C of The Income Tax Act and is an equity-oriented mutual fund scheme. One also needs to check on the lock-period applicable for these tax-saving avenues

6. Retirement planning

One of your long-term goals can be saving for your retirement​, such that you are not financially dependent on anyone after your retirement. Here, it will be effective if you select an investment option that endeavours to provide long-term returns that are sufficient for your living. You may want to keep inflation in mind while deciding how much money to invest in such a scheme.

7. Nominee

The purpose of your financial planning may get defeated if you have not declared nominees in each of the saving instruments that you have invested in. It is also advisable to have all your policies and schemes listed down at a place and shared with these nominees, so that if there’s a day when you are not around, they may be able to find it easily and benefit from it.

8. Emergency Fund

It is recommended to have a relatively liquid fund handy in case of emergencies. You may consider investing this amount in a debt fund with comparatively higher liquidity and lower volatility so that the money is handy when you need it and at the same time, aims to gets relatively better returns than a non-invested sum of money.

The above is not an exhaustive list. Investment Plans depend on goals, risk appetite of the investor and may not be the same for all. Investors should consult a financial advisor for a better understanding of various options available for investment suitable as per their requirement and plan investments accordingly.

Helpful information for Mutual Fund investor: All Mutual Fund investors have to go through a one-time KYC (know your Customer) process. Investors should deal only with registered mutual funds, to be verified on SEBI website under ‘Intermediaries/ Market Infrastructure Institutions’. For redressal of your complaints, you may please visit For more info on KYC, change in various details & redressal of complaints, visit: This is an investor education and awareness initiative by Nippon India Mutual Fund.



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