Markets can be unpredictable and volatile. You may sometimes hesitate to invest out of fear of losing the capital.Hence, spreading risk across or diversification is an important part of investing. If you are looking out for a financial product that can offer you diversification and capital preservation in order to meet your unique risk-return objectives, you can consider structured products as an investment option.A structured product is a result of financial innovation that offers an investment solution that can be structured as per your risk-return profile. Most of the wealth managers often come up with structured products for their high net worth (HNI) clients.
Structured products are market-linked investment solutions that are hybrid in nature and are tailor-made to adapt to your unique needs such as risk-return objectives and liquidity requirements.
Basically, the investment strategy of a structured product is non-traditional in nature that combines two or more asset classes (conventional assets combined with derivative products) to meet your specific needs.
This integrated investment solution is highly customisable and can offer you efficient diversification to your investment portfolio.
The performance of structured products is often linked to the performance of the NIFTY index.
A typical structured product comprises bonds, equities and derivatives as an underlying asset class.
These products can either come with capital protection (full or partial return of principal) feature or without a capital protection feature.
The objective is to enhance your investment return by investing in market-linked instruments such as bonds and equities while balancing out the risk during a market downturn by investing in complementary instruments like derivatives.
What are the Components of Structured Products?
Structured products with debt securities/bonds and equity derivative exposures are quite popular in India.
Typically, the following are the components of structured products in India:
A bond: Capital protection is offered by the bond component as the issuer of the bond promises to return the principal. In the case of structured products without capital protection, you can expect additional income and stability.
Equities (one or more): Equities as underlying assets enhance the return potential of the investment. There would be a single equity instrument or basket of securities such as stocks along with ETFs that follow a popular index, foreign currencies, etc.
A derivative product: The derivative component helps to balance out the overall risk. Options are commonly included as a derivative component in a structured product depending on the risk-tolerance level.
How does a Structured Product Work?
Though structured product majorly comprises traditional assets like bonds, it is strategized in a way to replace the usual returns of the bonds with non-traditional payoffs from other underlying assets, such as derivative products.
Let’s understand the working of a structured product with a simple example. Let’s assume, you invest Rs. 1,000 in a structured product with capital protection feature for five years.
That means you would receive the initial investment on maturity (on completion of a five years period) along with the return linked to the performance of an underlying asset over the period of five years. In this case, Rs.800 out of your Rs. 1,000 is invested in bonds or debt instruments whose value reaches up to Rs. 1,000 at the end of maturity, i.e. five years.
This is because the fund manager would invest in fixed coupon debentures to preserve your capital.
Now, the remaining Rs. 200 would be invested in equities and derivatives to generate the return and income.
The final return would depend on the performance of the particular index that the securities follow.
If the performance of the index is positive, say 25% over the last five years, then you would receive total return along with the amount invested (capital) on maturity.
In case, the performance of the index falls below the level at which investment was made, you would only receive the amount invested (capital) on maturity.
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What are the Key Features of Structured Products?
Structured products are issued by the private banking teams, wealth management firms and non-banking financial companies (NBFCs).
The top issuers in India include Edelweiss Capital Limited and Kotak Securities Ltd. including some of the foreign players like Merrill Lynch and Co. Inc and Citigroup Inc.
Following are the features of structured products –
Asset composition: Structured products are hybrid investment products with a complex composition of assets.Basically, structured products consist of fixed income securities like bonds as a large component for capital preservation along with equities and derivative products as an underlying asset class for capital growth and income.The right composition of asset classes allows the structured products to maximise the probability of return with efficient management of risk.
Investment amount: The ticket size for the investment into structured products may vary across issuers.In India, structured products are generally designed for high net worth investors (HNIs) starting with the minimum ticket size of Rs. 25 lakhs.Most of these investments are done through PMS (portfolio management services) and the guidelines of PMS are followed for the minimum cap on investment amount also.
Risk-return profile: Risk-return profile of the structured product may vary totally depending on the way in which the particular product is structured.Being a highly customisable investment product, structured products can be modelled to suit the needs of conservative to highly aggressive investors.As the return of this product is linked to the performance of an index, the return generated generally ranges from CAGR (Compound annual growth rate) of 10% to 25% or even higher depending on the composition, market conditions and various other factors.Apart from the market risk, structured products are also subjected to the credit risk of the issuer as a bond being the major component.
Tenure: Generally, structured products come with limited maturity which requires you as an investor to stay invested for the specific period.In India, the maturity of structured products ranges from 12 months to 36 months as these products are structured around the equity market.
Professional management: Structured products are designed and managed professionally to meet the risk-return objectives of the investors.With professional management, structured products are effectively managed with various strategies to meet the return requirement.The structured product offers flexibility to meet the requirement even during the market downturn.The fees for the professional management of structured products may vary across issuers.
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Structured Products Market in India
In India, structured products started garnering the limelight sometimes during 2007 and 2008.
Structured products are also referred to as market-linked debentures (MLDs).
According to CARE Ratings, the structured product segment or market-linked debentures in India will increase in size by the issuance of up to Rs. 17,000 Cr. in FY 2020 in comparison to Rs. 12,246 Cr in FY 2019.
You can take a look at the report issued by CARE ratings on this.
What are the Benefits of Investing in Structured Products?
Considering the market volatility in recent years, structured products are gaining popularity. You can benefit from the market upside by investing in structured products while limiting your risk during the economic downturn.
Mainly, the following are the benefits of investing in structured products
Customised view: As structured products are highly customisable, it enables you as an investor to have a view on the market for two to three years specifically and then monetize the same.
Capital protection: Most of the structured products come with capital protection features that make it a suitable choice for risk-averse investors. However, all types of investors can invest in structured products to benefit the diversification it offers.
Higher return potential: Along with capital protection, structured products can generate attractive returns depending on the performance of the index the underlying asset is linked to.
Risk return dynamics: Structure product boosts the portfolio return by investing in growth assets and manages risk efficiently by investing in derivatives.
Hybrid exposure:Exposure to two or more asset classes and mix of traditional and non-traditional assets offer efficient diversification to your investment portfolio.
Tax efficiency in Structured Products: Structured products are gazing the focus of high net worth investors (HNIs) and institutional investors due to its tax efficiency.When it comes to the tax treatment of structured products, long-term capital gains are taxed at 10% (for the investments held for more than 36 months) + surcharge for listed market linked debentures (MLDs).However, considering the complexity of the structured products, it is important to consult tax experts and seek advice before you invest in any structured product.
What are the Various Types of Structured Products
In India, structured products are mainly categorised in two types based on their benefits offerings and the way they are modelled.
Conservative structured products: Conservative structured products are the investment solutions that come with capital protection themes. The upside participation of these products in the risk asset returns is relatively lower.
Let’s take an example to understand this. Let’s assume you have invested in a conservative structured product with 140% upside participation in equity markets till maturity.
That means, on maturity if the market falls below the index level at which it was invested, you get back your principal.
Here, 140% upside participation means, if the index or benchmark increases 10%, then you would receive a 14% return on the equities/derivatives portion of your investment.
Aggressive structured products: Aggressive structured products are the investment solutions that come without capital protection features. The upside participation of these products in the risk asset returns is relatively higher.
Let’s take an example to understand this. Let’s assume you have invested in an aggressive structured product with 200% upside participation in equity markets till maturity.
That means, on maturity if the index fails to cross the level, you may lose out on a part of your capital also. But, there is potential for higher returns also depending on the performance of the index.
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What are the Important Points to Keep in Mind While investing in Structured Products?
If you are considering investing in structured products for diversification or for higher returns along with the preservation of capital, here are a few important things for you to keep in mind.
Liquidity: First important point to keep in mind is the liquidity element in these investment solutions. In comparison to other short-term or medium-term investment options, structured products are not liquid in nature.As structured products pre-packaged investment solutions with limited maturity period, you are required to stay invested in the product till maturity to reap the benefits.However, some of the markets linked debentures that are listed on an exchange can provide you with intermittent liquidity.
Suitability to your risk appetite: Specifically when you are investing in a structured product with partial protection of capital or without capital protection features, you need to access your individual risk profile, as there are chances of losing in an aggressive structure.
Credit risk: Though many structured products come with capital protection themes, the complete return of capital on maturity may still depend on the credit risk of the debenture issuer.
Hence, considering the credit profile of the issuer is also important while investing in a structured product.You need to also access the fixed income portion of the structured product to understand the ratings and to prefer the investments with higher ratings to avoid the credit risk.
Sometimes, a structured product (with capital protection) that comes with a cap on upside participation may limit your gains.
It is important to understand the complex nature of the structured product, the risk associated with each underlying asset needs to be understood before investing in this investment solution.
To sum up, the volatile market has created the need for a financial product that can sustain during all seasons of the market.
An investment solution like structured products that are highly customisable, tax-efficient and also offer attractive returns along with capital protection, are an apt choice for high net worth investors.
Professional design, management and diversification offered by the structured products manage the risk effectively along with enhancing the return.
Structured products can help you achieve your goals with its unique structure and investment strategy in every market situation.
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When it comes to housing, you have two options of picking a home – renting and buying. Which, of these two options, do you think is better?
Renting a home is feasible if you don’t have sufficient funds in your hand to invest in a house.
Moreover, if you relocate frequently, renting is a better bet. Owning a home, on the other hand, is beneficial since you can create an asset for yourself and your family. Even if you don’t have considerable funds, you can always opt for a home loan to buy your own dream home.
You should consider your current income, financial standing, existing debt, asset liability ratio and affordability before you decide to buy a house. Moreover, the following pros and cons of buying your own home should be considered –
Watch the video as we explain the basic concept of buying vs renting a home
Pros of buying a new home
Creation of an asset
Legacy for your family
No hassle of dealing with landlords or uncertainty of accommodation
No compromise on designing the home
Long term investment
Home loans give you tax benefits
Cons of buying a new home
Considerable upfront cost even if a home loan is availed
Recurring EMIs might prove to an added expense
Reduction in mobility
Lower disposable income if you have started your career
Additional maintenance costs
Even though buying a home has its drawbacks, it proves to be a wise decision in the long run.
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Tips for buying a home
When you decide to buy a house, it is an emotional decision and you should ensure that you have considered all relevant factors before choosing your dream home. These factors include the following –
Cost of the house
Area of the house
Shopping around for home loans
Checking the terms and conditions of the property
Buying a home might be a one-time decision and since it involves a considerable amount of money you should be careful when choosing a home.
Very few individuals can procure the entire cost of buying a home and this is where a home loan comes into the picture. Home loans give you funds to buy a house of your choice without putting a big dent into your savings. The benefits of home loans are as follows –
It is a good loan because it boosts your credit score, builds your credit history and gives tax benefits
It helps in funding your dream home easily
It is quick to avail and you can get the funds easily
The loan can be used to finance up to 90% of the cost of the home
The loan is available for buying a ready home, under construction home or even a plot of land
You can avail a home loan for reconstructing an existing home
Home loans are affordable with a low interest rate
One of the primary benefits of home loans is that it offers tax benefits. Let’s understand these benefits in details –
Income Tax Section
Principal repayment of the home loan is allowed as tax deduction from your taxable income up to Rs.1.5 lakhs
Registration charges and stamp duty paid on the loan are tax deductible
Interest paid on a home loan is available as an exemption up to Rs.2 lakhs
If you are a first time home buyer, interest paid on the loan would be allowed as a deduction up to Rs.50,000 in addition to Section 24(b)
If a home is bought up to 31st March 2020 by a first time home buyer and the stamp duty cost of the home is up to Rs.45 lakhs, additional deduction is available on the interest paid on home loan. The limit of deduction is Rs.1.5 lakhs over and above the limit under Section 24(b)
Watch the video as we explain the basic concept of how you can save tax on home loans
So, buy your own home with a home loan and get tax benefits as well as build your credit score. Understand how to choose a dream house and then invest in one.
For a complete guide on buying a house, you can take this course to understand the various aspects of buying and owning your home rather than renting it.
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Tax is a type of federal revenue collected by the Government from individuals and companies. Tax can be a direct tax or an indirect tax. Direct tax is charged on the income of an individual and is also called income tax. Indirect tax, on the other hand, is charged on goods and services, like GST.
Income tax is a direct tax levied by the Government on your earnings. Whatever be your source of earnings, if you earn an income in a financial year, you are liable to pay tax on the same. If you have multiple sources of income, these sources are aggregated together to give you the total income on which you have to pay tax.
What are 5 Heads of income?
For the purpose of income tax calculation, there are five heads of income under which your income can be classified. These heads are as follows –
Heads of income
Income from salary
Income that you earn as salary from being employed
Income from business or profession
Income earned from your business or from profession
Income from house property
Rental income or income earned when selling a house
Income from capital gains
Income earned when a capital asset is transferred
Income from other sources
Income which does not fall in any of the above-mentioned heads
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Amount of tax payable
The amount of tax payable depends on your total income earned in a financial year. The Government has specified an income tax slab and your tax liability is calculated as per the tax slab. The tax slab for individuals below 60 years of age is as follows –
Up to Rs.250,000
Rs.250,001 to Rs.500,000
Rs.500,001 to Rs.10,00,000
Rs.10,00,001 and above
A new tax slab has also been proposed from the financial year 2020. This slab is optional, has lower tax rates but disallows deductions and exemptions. The new tax slab is as follows –
To reduce the tax liability of taxpayers, the Income Tax Act, 1961 has allowed a range of deductions which can be claimed from the taxable income. These deductions help in bringing down the tax liability and saving tax.
Income tax deductions are contained in Chapter VI A of the Income Tax Act, 1961 from Sections 80C to 80U. You can utilize any of these sections if you are eligible for the deductions and save taxes.
Tax saving investments
Investments which help in reducing your tax liability are called tax-saving investments. Investment into these avenues help you claim deductions from your taxable income and lower your tax liability. Some of the common and popular tax-saving investments include the following –
These tax saving investments are available under Section 80C of the Income Tax Act, 1961. Moreover, if you invest in health insurance, you can claim a deduction of up to Rs.1 lakh under Section 80D. The NPS scheme also helps you save additional tax of Rs.50, 000 under Section 80CCD (1B).
After registration, log into your account and choose the correct ITR
Download and fill up the ITR with the details of your income, applicable deductions and exemptions
Submit the filled ITR online and verify it and your income tax filing would be done
Important things to consider while filing income tax
While filing your income tax return is an easy process, here are some important things which you should consider –
N If TDS is deducted from your income, the same would reflect on the income tax website and you would also get a TDS certificate. Thus, when you pay your tax, deduct the TDS already paid and pay the remaining amount of tax.
If the TDS paid on your behalf is higher than your total tax liability, you are eligible for an income tax refund. Income tax refund is the refund of excess tax paid by you. It is refunded by the income tax department after you file your taxes. You just have to claim a refund when filing your ITR and the refund is credited within 3-4 working days directly in your bank account.
Form 16 is issued by the employer to its employees. It contains the details of TDS deducted from the salary and deposited with the Government on behalf of the employee. The form is issued in two parts, A and B and it contains the details of the employee, employer, salary paid and the TDS deducted thereon. Form 16 is needed at the time of filing your ITR
While Form 16 contains the TDS details of salary, Form 26AS is a consolidated statement which contains the details of TDS deducted from all sources of income. Thus, you can use Form 26AS to find out and match the total tax deducted from your income in a financial year.
Paying the correct amount of tax and filing your returns timely is your federal duty which you should not avoid. So, learn the basics of tax filing and the ways in which you can save tax. For a more informative guide to taxation you can refer to this course. It contains the in-depth understanding of tax and how to reduce it and would help you to calculate the correct tax liability.
Having a good education is the foundation stone for a bright career. Your education determines your success and that is why a good education is always stressed upon by parents. When it comes to education, international education is a dream which every parent has for their children. They want their kids to receive education from a reputed international institute to give them an edge in their career.
Education, whether domestic or international, proves to be quite expensive. Education inflation is steadily rising and pursuing higher education in any reputed institutes requires a considerable amount of money. While parents save money to educate their child, sometimes, the savings might not prove sufficient, especially given the increasing cost of education. In such cases, an education loan comes to the rescue.
An education loan is a loan which is allowed by banks and non-banking financial companies to fund higher education. You can avail a loan for yourself, your children and even for your dependent siblings for financing their education. Some of the features of education loan are as follows –
The loan funds the cost of tuition, admission, boarding expenses and other costs related to the course being financed
The loan is a good loan as it offers tax benefit on the interest paid for the loan under Section 80E of the Income Tax Act, 1961
The repayment usually starts a year after the completion of the course of getting a job, whichever is earlier
The repayment tenure allowed is between 7 to 10 years
How to apply for an education loan?
You can apply for an education loan either by visiting the branch of a bank or NBFC offering the loan or online. Online application can be done either through the website of the bank or NBFC or through the website of loan aggregators. Aggregators are better as they allow you to compare the loan offers of different lenders and then choose one which has the lowest interest rate. A collateral security might be needed to avail the loan when the loan quantum is high. You must also fulfil the eligibility criteria of the lender to avail the loan.
Benefits of education loan
An education loan is beneficial in the following respects –
Ease of financing quality education
Funding international education
Protect your financial savings from being drained
Affordable interest rates
Funding of all types of expenses incurred in higher education
Tax benefit on interest paid
Easy repayment which allows the student time to get a job before loan repayment starts
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Affording an education loan
An education loan has a long repayment cycle and also a low interest rate. These factors make it easy for parents to afford an education loan. Moreover, the tax benefit allowed at the time of repayment of the loan also helps you increase your disposable income therefore making the loan affordable.
Repayment of an education loan
Repayment of the education loan is done through EMIs. The EMIs depend on the rate of interest, principal amount of loan and the repayment tenure selected. The repayment starts a year after completion of the course and getting a job. This allows students to easily pay off the loan. As a parent, you should make your child repay the loan from his/her income. This makes your child financially responsible and also reduces your debt burden.
Estimating the amount of education loan
When planning for your child’s future, you need to estimate the cost of education which would incur when your child pursues higher education. Moreover, if you are availing an education loan, you need to assess the amount of loan needed to sufficiently cover your child’s education expenses.
When estimating the cost of the child’s higher education, inflation should be considered. Inflation would increase the cost of education in future and so you need to find out the actual funds needed. For instance, if a course today costs Rs.10 lakhs, in 10 years’ time, it might double to Rs.20 lakhs.
You, therefore, need to plan to accumulate Rs.20 lakhs by the time your child needs funds for education. Thereafter, when the time comes, you can finance the education of your child through your savings and also through an education loan if your savings fall insufficient.
Education is a very important thing for your child and being a parent, you would want the best for your children. To afford the best education, you can save and also avail an education loan to ensure that your child does not have to compromise on the education which he/she should receive. For complete details on education loan, take this course on financial planning and understand what the loan is all about and how it works.
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As the breadwinner of your family, you need to provide for the varied financial needs of your family besides the needs of yourself. You, therefore, need to plan your finances in such a manner that the different family related goals can be met. Do you know how?
Let’s have a look at the different financial needs which you and your family can have and how you can plan for such needs effectively –
As you become financially independent, you need to address your financial needs and plan for your goals. These goals include –
Let’s understand how you can plan for each of these goals that you have –
Planning for wedding
Weddings are once-in-a-lifetime affair and involve considerable expenses. As such, you need to plan for them. Ideally, you should plan for your wedding related expenses in advance. You can set aside funds regularly to create a considerable corpus to meet the expenses of your wedding. Alternatively, if you are planning to get married in the near future, you can avail a personal loan. Personal loans are unsecured loans which give you funds for immediate financial needs.
Planning for wedding related expenses should also include planning for a honeymoon. As with weddings, honeymoons are also a once-in-a-lifetime affair and can prove expensive if you plan a perfect itinerary. You can, therefore, save in advance or opt for a personal loan to fund your honeymoon expenses
Though it seems far off, you need to plan for your retirement from an early age. When you do so, you can save small amounts over a long term period and build up a considerable corpus. This corpus would, then, help you fund your retirement expenses. You should choose suitable investment avenues for investing your retirement fund based on your risk appetite. Also keep in mind inflation and its effect on living expenses so that your corpus can be inflation proofed
2) Planning for Family
Once you have taken care of your needs, you should focus on the financial needs of your family, i.e. wife and kids. Here’s how you can plan for your family’s needs –
Planning for a DINK family
A DINK family means Double Income No Kids. This family is where both the husband and wife works and they have no responsibility of kids. These families have a high disposable income with no immediate responsibilities. If you have a DINK family and you are planning on having a child, you should, first create a corpus for your child’s future. Thereafter, you can plan for –
Buying a home
Buying a luxury car
Going on international trips, etc.
A higher part of the disposable income should be directed towards savings so that when responsibilities increase, you have sufficient savings at your disposal. Retirement planning should also be started so that you can create a substantial corpus for retirement.
Vacations are a way to unwind and a family vacation helps you spend time with loved ones. So, if you take vacations regularly, you should plan for them. You can save and create a travel corpus for your holidays by investing in low-risk funds since vacations are a short-term goal. Moreover, if you earn a bonus or a profit, you can use it to supplement your travel fund. If, however, you are short on funds, you can avail a travel loan. It is a type of personal loan which gives you funds for travelling so that you can take a vacation with your family.
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3) Planning for Parents
Financial planning for your parents should be done separately because they have distinct financial needs which need to be met. You need to make your parents financially self-sufficient so that they can manage their finances even when you are not around. So, here’s how you can plan for your parents’ financial well-being –
First and foremost, you should highlight the importance of saving money. Your parents should be made aware of the fact that they need to save money for their retirement so that they can live comfortably. Help them save and choose the right investment avenues for their retirement needs.
Parents often want to leave behind a legacy for their children. You should, therefore, help your parents do the same. Help your parents invest their savings and then create a Will allocating their property in the way that they want.
If your parents are financially dependent on you, buy a term plan for replacing your income in case of your unfortunate demise. Thereafter, insure your parents under a senior citizen health plan for their medical needs.
Pensions give you parents regular incomes in their old age so that they can be financially independent. So, help your parents plan their pension. Help them invest in a life insurance pension plan which would give them lifelong incomes
While you plan and take care of your and your family’s financial needs, you need to educate your family about the various assets and liabilities you have and how the same can be accessed. Store all your financial documents in one safe place and educate your family members about them. This would help them access the documents when needed when you are not around.
Your family is your most prized possession and their financial planning should also be sound and fool-proof. So, follow the above-mentioned financial planning tips for your family. For detailed information on any of these tips, you cantake this FREE financial planning course and get solutions to all your questions.
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Everyone wants to be rich so that they don’t have to worry about meeting their financial responsibilities. While becoming rich might be a tad bit difficult, you can definitely meet your financial responsibilities with your existing income if you plan for it.
Financial planning is a beneficial tool to plan your finances so that you can achieve your goals easily. It is a step-by-step process of planning your finances in such a manner that your income can build up a corpus for your future goals.
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When talking about financial goals, the first thing to understand is what exactly these goals are. Financial goals are nothing but the different financial responsibilities of your life. They are financial needs which require funds and should be fulfilled during your lifetime.
Financial goals differ across different individuals but some of the common ones include the following –
These financial goals can be short term, mid-term or long term in nature based on when you need to fulfil them. If the goal is to be fulfilled in the coming year or two, it is termed as a short term goal, like taking a vacation. Similarly, a goal which should be fulfilled after 8-10 years would be a long term goal, like retirement planning.
While you plan for your financial goals, you should make sure that your goals are S.M.A.R.T. Do you know what is the meaning of S.M.A.R.T. goals?
The full form of S.M.A.R.T. is as follows –
S – Specific
M – Measurable
A – Achievable
R – Realistic
T – Time-bound
If a need fulfills these criteria, it can be categorized as a financial goal. Alternatively, if it doesn’t, it would not be a financial goal and planning for it would be foolish. For instance, you wanting your child to pursue international education is a S.M.A.R.T. goal but you wanting your child to study only in Harvard or Oxford is not S.M.A.R.T. because admission to such institutes is based on merit and not on financial planning.
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Emergency Planning – The Stepping Stone to Financial Planning
While identification of financial goals is the first step in financial planning, emergency planning is the foundation of a successful financial plan. Emergency planning means planning for an unexpected emergency which would cause financial loss. You should first create an emergency fund so that your financial plan is not disturbed due to an expected emergency. Emergencies are unavoidable and the wisest thing to do is to plan for them so that they do not disrupt your carefully laid plans.
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Core Principles of Financial Planning
To start financial planning, you need to identify your goals and plan an emergency fund for those challenges which life throws your way. Once you are done with these two important tenets of financial planning, you can chalk up your financial plan for your goals. When creating a financial plan, however, the core principles of financial planning should be kept in mind. These principles would help you avoid common financial mistakes and create a fool-proof financial plan for your goals. Here are the top 20 most common money mistakes people often make which you should avoid while planning your finances.
So, what are the core principles of financial planning?
There are 4 core principles of financial planning which are as follows –
What they mean?
Core principle # 1 – Spend less than you earn
Limit your expenses so that you can save. The higher the disposable income that you have, the more can you save towards your goals and build up a considerable corpus.
Make a budget and stick to it
·Supplement your income
Core principle # 2 – Pay off unnecessary debts
Bad debts can incur high interest charges and severely impact your credit score. You should, therefore, manage your debts effectively and get rid of bad debts
Pay off bad debts before planning investments
Continue good debts for the benefits that they provide
Core principle # 3 – Retirement planning
Though retirement might be a far off thing you need to plan for it over a longer tenure to accumulate an optimal corpus which can take care of the inflated expenses post retirement
Start retirement planning from an earlier age
Earmark a retirement fund and invest in it regularly to grow with through the power of compounding
Core principle # 4 – Incentivize yourself
You need to keep yourself motivated on your financial journey so that you can stick to the financial plan that you have made
Enjoy life and don’t fret about your goals if you have made a financial plan
Review your plan regularly
Incentivize yourself if the financial plan is working
Financial planning is important if you want to achieve financial independence. The adore-mentioned aspects of financial planning have been explained in brief. If you want a more detailed guide into financial planning, what it means and how to go about it, you can take this financial planning course and become a pro.
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