Financial planning holds utmost importance in one’s life and it is important to carefully manage one’s finances to secure one’s present and future. During one’s lifetime, there will be a lot of events – education, job, marriage, children, and retirement that can affect the financial plans. It is important to stay prepared for such situations than becoming worried at the last moment!
This is the time when you are mostly focusing on your education and are excited to start your professional career. This is the time when you should start tracking your income and expenses, so as to reconcile the budget at regular intervals. It is believed that any investment started at this life stage proves to be really beneficial and stays with you throughout your lifetime. You get habituated to save a certain amount for certain purposes and can reap benefits of the same in the future.
As you have just started your career, apart from your regular expenses, it is important to keep a part of your income for retirement funds! Yes, the earlier you begin, the better it is! Check with your employer about the incentives that you are eligible for – pension schemes, life cover, and medical insurance. If there is any part of incentive that doesn’t cover the above basic requirements, you must proactively invest in the same, on a personal level.
During this time, you may switch employment a few times but that shouldn’t affect the investments that you have made. So, don’t over stretch yourself, in the first place.
You will also get married during this time. It is important to maintain a list of personal expenses (the ones where you will be investing for the big day) along with the honeymoon expenses and post marriage settlement expenses.
During your thirties, there can be discussions about higher education, taking a home loan or even planning for kids. In case you are planning to take a loan, it is important to understand the repayment terms and the interest rates involved in different scenarios. To check the amount that needs to be repaid in a given time period, use a home loan calculator. Consider all scenarios such as job change, uncalled illness, unforeseen expenses, while choosing your monthly payouts for loan repayments.
Having kids is a responsibility, and requires proper financial planning. Maintain a monthly budget for spending on things related to your kids, and spend accordingly.
During this time, you will also exceed in your career, financially as well! So, make sure, you have upped the amount that you will be saved for your retirement funds. Also, it is important to diversify your investments. Put in money in a couple of different investment options, rather than putting whatever you plan to save in one scheme, and reduce the financial risk involved.
Fifties and Sixties
Most of us, during this time, will be involved in taking care of ailing family members and/or parents, in financial terms as well. Also, at this time, your kids would have grown to take up higher studies and/or jobs. Thus, it is important to plan for these expenses as well alongside securing your own retirement needs. At this point of time, one must also look at other income options, be it from pension schemes or other investments that give sufficient monthly income.
If you have surplus income, you must invest it, to supplement your income for a few more retirement years. If you had some lifestyle goals such as buying an expensive car or going for a holiday, this is the time when you can look to spend some amount on fulfilling the same.
Retirement and Beyond
After retirement, you must maintain your expenses vs income tracker to keep a check on the outflow of the money. During this time, medical expenses are bound to increase. You must keep a watch at the maturity of your investments and smartly convert it into vehicles to fund your retirement needs. Money received from these investments will supplement your income during the retirement years.
You must also consider the scenario when either you or your partner might have to face the loss of a partner. Thus, you must relook at your life insurance policies alongside other investments and also keep a track of the nominees for the same.
It is important to share your financial goals as well as investment details with your partner! Planning early in life is the key!