Careful planning can always help reach your financial goals. It may seem like hard, but doing so can prepare you for a more comfortable life when you decide to stop working and start enjoying your retirement. You may make change as needed but remember to stick to the plan so that you can achieve your milestones without delay and achieve your goals exactly you made them when you were younger.
>Age plays a crucial role in financial planning. As soon as you start earning, you need to understand basics of financial planning. Identify short-term and long-term goals. Understand and identify priorities depending on age and life stage. There are many financial instruments in the Indian market. It is recommended to take the help of professional financial planners.
Your 20s would be your first foray into the professional world, which means this is the time when you’ll start earning your own money. It’s also an excellent time to set your financial goals and decide on your approaches to accomplish those milestones. This may be exciting times since you’re earning your own money and you’d want to spend it on things you probably don’t need / exciting, while you keep aside some budget for your basic needs and adequate partying it is important to start saving on priority.
You need to pay back your educational loans as soon as possible in case of any. Start building good credit history that helps you get home loan etc at best interest rates.
When you save / invest in financial products it is important to understand insurance products are generally age based. For the same benefits, you will pay less when you are younger and gradually pay more as age grows. You need to understand the insurance needs for various goals like family security, kid’s higher education, kid’s yearly education and retirement. Generally, insurance products are needed for the goals that need to be secured even when you are not around for the family due to unforeseen events in life. In our view, once kids are born education must continue irrespective of bread winner is alive or not. At least basic education should be insured while you continue to invest in higher return investments for best possible education (like best B-Schools, Medicine, International education) for kids.
Even for retirement, there are few suitable products that you can consider for some part of your retirement need and keep exploring and understanding on various ways to diversify your investments for retirement.
In India marriages are considered grand event for life. Spend lot of money on clothing, ceremonies, food and hosting friends, relatives, and well-wishers. It is important to plan for marriage and honeymoon expenses instead of getting into debt trap by taking loans and using credit cards for these expenses. Try and spend within available budget and savings rather than taking loans and using credit cards.
30s are when things get serious and expensive life events happen. People get married, have kids, and buy a home. These significant milestones mean that even if your earnings grow, you may find it challenging to figure out how to save for retirement or avoid getting into debt. An excellent way to deal with this is as your salary increases, you figure out ways how to live below your means and save whatever extra you make from raises and bonuses. Remember, a home is one of the largest investments you’ll make in your lifetime and paying off a mortgage can reach up to 30 years.
Raising children is another big investment that requires careful financial planning to be able to attend to their needs. Keep in mind that it gets more expensive as they grow older and when you start providing for their education.
It is important to make sure, you have 6 months earnings / savings as emergency funds to be able to manage job risks / income loss / any unforeseen expenditure that come across. It is also important to make sure you keep aside your yearly commitments by saving them in low risk and high liquid debt instruments. Fixed Deposits / Recurring deposits are not ideal as the returns are considered as income attract higher taxes. Please talk to us how where to park these funds aside while they are available to liquidate any time and generate good returns.
Now that you’ve started a family, some or even all may be dependent on your income, so it’s important to complete your life insurance policies and start creating a will. Getting life insurance in 30s if not 20s allows you to lock in a lower rate while you’re still young and healthy. Never leave your insurance needs to 40s. Once you reach 30, it’s time to increase your contributions for your retirement fund. If you started at 10% in your 20s, you could increase it to not less than 15% of your income.
Middle age is when you’re more established in life, Income is at lifetime peaks and your finances should be able to reflect that. This will help you aim for more critical milestones in life. Hopefully, your debts are kept at the minimum. This includes car loans, credit card bills, home loans, and other consumer debt, which allows you to focus on other essential aspects, such as your kids’ college education. identify where to enrol them, so you have an idea on how much to spend on tuition.
Another great goal to work on at this age is to have twice your annual income saved in your retirement accounts. You can augment this by finding other sources. You can do this by starting a small business or perhaps take on freelance projects that fit your skill.
As soon as you enter 40s, it is important to make sure you have adequate and best health insurance plan. People generally expose themselves to health issues due to stressful work, responsibilities at home and social pressures. Taking health insurance while you are healthy helps avoiding loading and policy declines.
You should make sure to diversify your investments into multiple financial instruments like Gold, Stocks, Mutual Funds, Bonds, Debentures, Retirement Plans, Real Estate and other structured products and alternative investments.
Time flies fast. And when you’re close to the end of your professional life, it’s where everything starts to slow down, so take the necessary measures to max out your retirement contributions to help prepare you for retirement. Meet your financial advisor to help you figure out which options that work best for you. It would be ideal to pay off your mortgage to give you more financial freedom, which you should take advantage of for your retirement. By this time, it would be best to have saved around four to five times your annual salary for a more comfortable life as a retiree. Start to identify ways to earn your pension through various options like Systematic Withdrawal Plans, Annuity Plans, Guaranteed pension products, rental income, Provident Fund, Public Provident Fund and National Pension Scheme etc.
Being a senior citizen is the time when all your savings and smart planning should be paying off. You can fine-tune your retirement goals according to your preferred lifestyle as you enjoy the rest of your days. You can consider downsizing your home or move to a smaller house to lessen your expenses. Finalize your will in case you wish to alter a few details. If needed, you can make other significant changes as you transition towards retirement. Review your life insurance policy to make sure everything is in place. Look into long-term care if you deemed it suitable for yourself and your spouse. Ideally, this should be in place before you need it.
Conclusion
All this may seem daunting, but you’ll have to step back and look at the bigger picture to help you put things into perspective. Keep in mind that there is no cookie cutter way to achieve success, so you don’t have to be discouraged if you passed these milestones. What you can do is take a moment to think about where you are and how your finances are doing, so you can make the necessary adjustments. The key is to always make deliberate choices when it comes to your finances. You should also be aware of these milestones, so you can never lose track of your financial goals up until you settle comfortably into retirement.
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