There are so many things that one wants as an individual and as a family. The objective of financial planning is to make sure to that your client has the money to achieve it all. Having a good financial plan means resources have been allocated towards achieving the goals in a systematic manner.
Set goals and priorities
As a first step, ask your client to write down the goals. Now, ask him to prioritize them. Families do not always have the budgets to fund several goals all together. A good financial plan can help him focus on one goal at a time.
Here are some essential goals and priorities that can be used by him to create his own list.
Build an investment portfolio
Goals cost money. To accumulate wealth, one first needs an investment portfolio. Investors often feel that they don’t have money for investments. But if you advise them to put aside at least 10% of their income every month, they can make their money grow.
A healthy portfolio has investments across equity, debt and cash so that one can have growth, stability and save tax. Mutual funds are a versatile way to make investing simple. A systematic investment plan (SIP) lets your investor invest as little as Rs. 500 every month. So tell him there is no excuse now to not invest.
Manage Taxes
Tax planning is a way to make your client’s earnings more tax efficient. So in this way your investors can save money on tax at the end of the financial year. An equity linked savings scheme (ELSS) with a short lock-in period of 3 years makes for an ideal way to avail of tax benefits under Section 80C of the IT Act. As an added advantage, it offers growth. This combination of letting the client take advantage of tax exemptions and planning his investments will make sure that he gets maximum returns.
Take care of health and retirement
Though life spans have increased compared to earlier generations, people have become more prone to ailments and the consequent medical costs are higher. Any unfortunate health condition down the road could drain out a considerable part of your client’s savings. The financial plan needs to be well prepared for it. With good health insurance, your client will not only be able to provide for himself but also for his family the quality health care they need without breaking the bank.
When it comes to retirement, one needs to start planning early to retire comfortably.
Calculate the retirement corpus with this formula
A good retirement plan will require your client to decide when he plans to retire and how much is he going to need to meet his monthly expenses at retirement. In addition, make sure his life insurance is at least 10 times his annual income. Compare policies and get the one that is most affordable and meets all his needs.
Keep monitoring
Market conditions are always changing and portfolios need to be reviewed accordingly. Review client portfolio at least once a year or whenever there is an important life change. It ensures his portfolio is adapting to the life and the financial environment around him.
Time is money. So start planning early to put your client on the path of security and growth.
