Turning 30 years just presses the panic button, as you know that 20’s are over. You are still earning and are married and some of you are blessed with kids also. This just underlines the need for financial planning which will carve your future finances. Here is how you will deal with financial planning which will place you in the most convenient position.
Early Financial planning
- You may think that you are quite young to save and invest. But, in fact, this is a perfect age to start saving for secured financial future. Inflation is your worst enemy who will eat up major chunk of your salary.
- Education is a highest rising cost, planning for the education of kids would be your major concern. Education costs are rising double as compared to rest of the wholesale inflation rate.
- Marriages are set in heaven, but spending is done by the parents mostly. So, you have to plan for this expenditure also.
- The key point to remember is that money need in the future should be discounted by a minimum of 6-8% inflation rate. You have to consider that at least 6-8% proportion of your future income and returns on the investment is going to be taken away by then prevailing inflation rate.
- So, try to estimate how much will be needed in future for marriage or education or both. This can be easily estimated by considering the current costs and adding up at least 10% over and above such costs.
- Always invest in any instrument which will not lock your money, when you need it most. So, if you are investing in PPF or Gold ETF etc. for securing kid’s education or marriage, it may not be worth it. Instead, try investing in equity and debt in 40:60 ratios depending upon your risk profile. Also, you need to maintain a flexible budget, because the core investment demand may change due to unpredictable reasons.
- If you buy a term insurance plan in your 30’s, you may be able to get lower premiums for the reasonable sum assured. Also at such young age, there are very few medical checks. In case you are yet to opt for health insurance too, pre existing diseases may create a horror in later life. Early stage health insurance policy would ensure wider coverage.
- Anyway, you will be at major risk till you opt for term insurance policy. This is because, sudden emergencies would not be covered and financial liability will have to borne by the family. So, it’s better to go for an Insurance policy at least at 30 years of age. This will ensure wider span for protection and will also entail lower payouts in terms of premiums.
- Points to remember are that term insurance should cover you till minimum of 60 years of age.
PPF (Public Provident Fund)
- PPF is a long tenure investment which has E-E-E tax pattern. This means investment in PPF will allow a tax deduction under section 80C. Contribution to PPF during the lifetime till maturity is tax free. Also the amount received on maturity along with interest is also tax free and is declared exempt.
- However, the lock in period is 15 years, which means that you have to invest in PPF and forget about it for a long time till you actually enter 5th year. Partial withdrawal is allowed from year 5 subject to certain conditions.
- Even though PPF gives you an attractive interest rate, you have to be ready to depart with liquidity with respect to amount invested. Primarily PPF investment aims of retirement planning, hence you should determine how much amount you require post retirement. There are several PPF calculators available online, which will help you arrive at the amount to be invested. The Only point to remember is that you should be okay with lower liquidity during the PPF lifetime of 15 years.
- You may think that your spending is very less but at the last week, you may wonder, where does all money go? There is an answer to this question – Expense tracker. Expense tracker actually counts each and every paisa of your hard earned money. Just like your father did, remember? You will have to be answerable to this tool and it works wonders. Now you may understand that you are spending almost half of your salary on clothes alone. These expenses may be in very less amounts, but will add up to larger amounts.
- So what are you thinking? Download expense tracker or any money managing app, and be relaxed that every paisa will be counted there.
- Once a wise man said that nothing in life is certain except death and taxes. So keeping in mind both, you have to plan for both. Financial planning has to be carried out by consulting your financial advisor who will consider the tax aspect.
- However, you have to keep in mind that life is full of surprises and you can’t be sure that you will always get a happy surprise. Ideally, you should invest money for emergency in any Flexi Fixed Deposit account, which gives an FD rate of interest on balance and at the same time acts as your savings account. Money can be easily withdrawn from this account using your debit card, after which there will be no interest on this amount. Alternatively, you can also invest in Liquid Mutual funds which may provide you with better returns along with liquidity.
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- This was just a summing up on important pointers. However you would feel the need to consult your financial advisor who will help you out in financial planning. Everyone has independent salary structures and different financial goals. So it is actually imperative on your part, to lay down every income and every expense (at least major) and your expectations from financial planning to your consultant. He would be able to advise exactly where to invest your money in. Financial Planning may include investment in Equity, Mutual Funds, Debt Funds, Insurance etc.
Turning 30 is not scary, however it is the age where you have to start your financial planning. This would be the perfect age to implement your financial planning phases. So do not delay any further and start to take control of your finances.