Your Step-by-Step Guide to Personal Financial Planning

What is Personal Financial Planning?

It’s the process of investing towards your goals in an organized manner while reviewing them regularly.

Step 1: Analyze Your Cashflows

  • List your income and expenses.

  • Ensure positive cashflows to start planning.

  • Tip: Cut unnecessary expenses!

Step 2: Know Your Net Worth

  • Assets = What You Own

  • Liabilities = What You Owe

  • Positive net worth = Good start!

Step 3: Budget Smartly

  • 50% Needs

  • 30% Wants

  • 20% Savings/Investments

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Step 4: Plan Your Goals

  • Classify as Short, Medium, and Long-Term.

  • Match goals with suitable financial products.

  • Example: Equity funds for long-term goals.

Step 5: Maximize Tax Benefits

  • Use Section 80C to save up to ₹1,50,000.

  • Invest in tax-free or low-tax financial products.

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Step 6: Be Prepared for Emergencies

  • Save 3-6 months’ expenses in an emergency fund.

  • Term life and health insurance are must-haves.

Step 7: Secure Your Legacy

  • Make a will for smooth asset transfer.

  • Update it as your assets grow.