For the last three months, Firstpost has been running a series on financial planning for specific life circumstances. We covered a range of topics, right from planning for Twenty Somethings to Suddenly Singles. And, from Freelancers to those who want to rock the cradle soon. And, we have said over and over again, that though financial planning principles remain the same, their utility changes based on your individual life circumstance. Today is the final story in this series- financial planning for people too busy to do financial planning.
Your Money: If there’s one word to define you, it has to be the word “busy”. You are busy all the time, working hard on your job. While you spend most of your time at a job that pays you money, you hardly have any time left for money management. Result - your financial life suffers. Not that your are unintelligent or not interested, you just don’t have the time. So today we pick seven financial principles to live by from our past stories, so that at least you do the bare minimum you need to ensure you don’t miss the money making bus.
Budget: Find out your net worth. The amount of assets you’ve managed to accumulate over the year. (Don’t take into account the house you live in). Next, find out the total debt you owe, right from home, car, education loans to credit card outstandings. Make a budget, and a saving and spending plan. And cut down on expenses wherever possible to fit the budget.
Emergency Funds: Have at least three months' expenses kept aside as an emergency fund. This includes monthly living expenses, lifestyle expenses as well as EMIs for your loans.
Debt: Go on a low-debt diet. With pre-payment penalty gone on floating rate home loans, try and pre-pay as much as possible. This will ensure that your get debt- free sooner and the house belongs to you earlier than planned.
Life Insurance: Get yourself a term policy with a cover equal to 12-15 times your annual expenses or 8-10 times your annual income. Remember to take into account the debts (like a home loan) you owe while deciding on a term cover.
Medical Insurance: Ensure that it covers at least between Rs 3-5 lakh over and above your employers' medical insurance cover. A family floater policy works well. Next, look into buying a serious disease disability policy, an accidental death-cum-disability insurance.
Asset Allocation: A good mixture of debt and equity mutual funds should work well. Don’t have more that six to seven funds in your portfolio. Have a mix of FDs, bonds, gold and property. Don’t overdo any asset class. Stock picking isn’t for you, so stay away from it unless you have the time and financial acumen to do so.
Retirement: Open a public provident fund (PPF) account and invest the maximum limit every year into it. Don’t withdraw your Employees' Provident Fund (EPF) when you change jobs. The National Pension Schemes is a good option, over and above PPF and EPF.
Will: No matter what age you are, have a will. If not via a lawyer, at least a simple paper will. Though registration of a will is not mandatory in India, we recommend you do so.
Technology: Use technology to help you with money management. You can make almost all types of investments online these days. Set reminders on mobiles to ensure you don’t miss any payments.
If you are too busy, ideally you should take the services of Certified Financial Planners, so that you get the right advice and you need not look into the operational details of money management, like filing forms, paying bills and filing returns.
Keep in mind the above mentioned things, so that you are on the right track of money management and you have time left to look into better things, like your family and your life.
Happy financial planning!
PS: Next week we start a new series called “How to buy” Keep tracking this space to know more.