Life is beautiful and exciting. It also comes with a lot of uncertainties. We cannot do anything about life’s uncertainties, but we can prepare for them.
We all have financial goals, and most of them are mandatory. For example, you need to save and invest for your children’s education. Also, you have to create a corpus for your retirement. These are financial goals you cannot avoid or delay. Then you must be planning for a foreign vacation with your family or buying a holiday home in the mountains.
You can only achieve these goals through financial planning. It is not only about achieving the goals. It is also about achieving them on time and preparing for the worst-case scenario(financial security). Financial planning takes care of every aspect of your financial goals.
Financial planning is a must if you have just sold your company and want to secure your family’s future.
What is the financial plan, and if you have sold your company, how can you secure our family’s financial future?
Planning is critical for humans in every aspect of life. When it comes to money, it gets even more essential. There are enough variables that can affect you if not planned well when it comes to money.
A financial plan is an evaluation of your current pay and future financial needs. It considers your existing assets, current income, future requirements, and withdrawal plans in the future. The financial plan is also about protecting you and your loved ones from life’s uncertainties and giving your financial security.
If you have sold your company and want to secure your family’s financial future, you need a detailed financial plan. You cannot risk the future of your loved ones with random investments.
Why is Financial Planning Necessary to Secure Your Future?
Let us understand the need for financial planning. Assume you want to travel from Delhi to Mumbai for a vacation. Can you get up one morning and travel? No, you cannot.
You have too many things to plan before traveling to Mumbai. First, you need to decide your budget, and based on budget, you will select the mode of travel. Second, you will choose the dates and then book the tickets and hotels as per the dates. Next, you will plan all the locations you plan to visit in Mumbai.
There is so much planning required for a week’s vacation. Can you imagine the planning needed for life? There are so many variables to life’s plan. You need to understand them to secure your future. Some of them are as below:
Inflation – Most people fail to understand how inflation is the biggest destroyer of purchasing power. You can purchase your dream car today at Rs 10 lakh, but the same will be available for Rs 15 lakh in the future because of inflation. Financial planning helps you bring inflation to your calculations.
Emergencies – Be prepared with money matters, or you will regret it. You can plan everything in life, but there can be unavoidable and unexpected events before you. They can eat up your savings. You prepare for the unexpected also with family financial planning
Retirement – One of the biggest goals for everyone is retirement. You would want to have a comfortable second inning of life. Creating a retirement corpus requires a lot of planning, and a financial plan covers it.
A financial plan is a must for every individual, and you should not postpone it any longer.
Five ways of Protecting the Financial Future of your family
You can protect your family’s financial future by following techniques:
Set SMART goals – The first step in financial planning is to set financial goals. Your financial goals should be SMART. It means they should be Specific, Measurable, Achievable, Realistic, and Timely. The other important aspect is to have clear short, mid, and long-term goals. You should be able to tag each financial goal in one of the above three categories.
Know your finances and get organized – Most people have no clue where the money goes by the month-end. In financial planning, you know everything related to your finances. You should know all your accounts and income streams. Secondly, you should know where and how much money flows out of your bank accounts. You have to get organized with your money.
Build emergency corpus – Your first goal should be to create emergency funds. Prepare for events like a medical condition or job loss. Hence, having an emergency corpus is a must. You should have 6 to 12 months of your monthly salary in your emergency corpus.
Clear off debt – If you have sold your company and have bad debt, you should clear it off. It could be a credit card bill or car loan. Bad debt chokes your budget and becomes a hindrance in your family’s financial future.
Insurance product – Just like financial planning is a must for every individual – insurance products are also a must. As mentioned earlier, life is full of uncertainties. You can prepare for them by buying the right insurance products. You need to have health insurance that covers critical illnesses and life insurance to secure the future of your loved ones.
What are the steps to involve the whole family in financial planning?
Financial planning is not an individual responsibility, and hence you need to involve your family members in the planning. Below are the steps to follow:
Talk about money – The biggest problem in an Indian household is that money is a taboo topic – money is not discussed among family members. When a family’s financial goals are designed, everyone should be involved and agree with the financial goals.
Everyone should stick to a budget – You can only achieve financial goals if every family member sticks to the budget. You should encourage young ones too to save from their monthly budget. It will keep everyone motivated in the family.
Identify responsibilities – You should share the financial responsibilities within the family. If you are the only breadwinner in the family, you should still invite your spouse in decisions related to money. Let her take care of specific household expenses.
Have fun in the process – To secure your family’s future, you should not compromise the present. Your focus should not only be on saving. Spend wherever required and enjoy life with your family. With financial planning, you invest in good investment instruments, and hence you do not have to stress too much on saving.
Investing options in Long-Term Goals
For your long term goals, you can invest in the below financial instrument:
You have sold your company and have a corpus in hand. With the cash in hand, your short and mid-term goals are sorted. However, you still have to plan for your long-term goals. Your money will lose its value over time if not invested intelligently.
- PPF (Public Provident Fund)
- Stocks and Mutual funds
- ULIPs (Unit Linked Insurance Plan)
Which options to pick and how much to invest in each category varies from person to person. Right Horizons has years of experience in Financial Planning. We understand each individual is different, and so are his financial needs. We help you invest in the right financial instrument, the right amount, and at the right time. Our financial planning services track, monitor, and ensure your goals are always within your reach.
- How to secure your family’s financial future?
You can secure your family’s future through proper financial planning. You should hire an expert that can help you organize your finances, create a roadmap of your financial journey and help you achieve all your goals with financial security.
2. How to be financially stable with low income?
Low income is not an excuse for not investing or doing poorly financially. You can have financial stability irrespective of your income. Create a budget that works for you. Even if you can save a small percentage, do it. Invest in financial instruments that can grow your money by giving you high returns.
3. How to be financially independent at 30?
To become financially independent at 30, you should start your financial journey without delay. The first thing you need to do is get rid of all your debts. Then create emergency funds, secure your life by buying insurance plans and start investing in instruments that can create wealth before you turn 30.