First decide what is your financial plan.
Sit with a financial planner or yourself ask what is your financial plan or aim. It should cover your retirement, saving for kids education, health expenses etc.
So based on your current income calculate along with inflation how much money you need after retirement. See online calculators. Hardly two mins.
Then see if mutual funds suit in your investment. For eg: If you are someone who is saving 3–4 lakhs for per months. Mutual fund might not be a good idea. You should try investments which offer better returns. Take higher risk, start a franchise, run a business etc. but the main goal all this should fit with your retirement plan. Don’t forget the big picture.
Now you will know how much percentage of your salary to invest in mutual funds each month.
Then first cover all your liabilities like:
- Life insurance - should help your dependents to live the same life standard incase policy holder dies
- Health insurance - dont depend only on your company’s insurance. Eg: You get a new job. Joining is on 1 July. You quit old company on 15 June. Some health issue happens on June 20. What you will do. Some companies policy lapse year end, govt job people need not worry, but get the importance.
- If not brought buy home insurance. If your having own home or high costly item in your home, even if rented home. Earthquake, theft, burglary, gas leak, fire etc..can happen to anyone but we just leave it careless. In case house got damaged home loan insurance which most banks make you buy wont pay. Home loan insurance is like life insurance, only if policy holder dies or got completely disabled, not getting income then they pay home loan and give house to your family. So buy home insurance, cover home building, items in home or both if its own home. Its cheap, eg i pay less than 4500 rupees for 65 lacs. Covered my home bricks, cement structure, furniture, electrical items, kitchen items, clothes, doors, windows. So you see how much precious things are in home. Burglary is also covered. But you have show bills while buying the policy, only then claim insurance will be possible if some theft happens in future.
- Always have 6 months amount of your salary or income as savings. Eg: we have insurance, we have investments but any emergency like job loss, say major function or repair at home, or you got sick for 6 months. How family will run home. We borrow and this cycle never ends. Always plan for emergencies. DONT NEGLECT.
- Buy any other plans based on your requirement like critical illnesscareplan. Eg: health insurance pays only hospital expenses. Life insurance pays after death or serious disability. But critical illness insurance plan pays lump sum if person got detected with cancer, heart attack, stroke. So your treatment health insurance will cover but your house expenses…so..
- Buy Top up health insurance. 10 lac health insurance in market will cost say 60,000. But buy 5 lacs insurance for 30,000 and top health insurance for 5lacs, cost only 10,000. So total 40,000. Only thing only if your hospital bill crosses 5lacs, your top plan gets activated. So see if this plan suits your planning. Dont choose if you run the risk of being hospitalized more than once a year from chronic diseases, it is best to pay for a super top-up plan. If you run the risk of being hospitalized more than once a year from chronic diseases, it is best to pay for a super top-up plan.
- Like this sit with a financial planner cover all your liabilities, buy all the necessary plans, HAVE EMERGENCY FUND, then remaining amount Invest based on the returns you expect.
- Lastly, always keep an eye on your financial plan. Atleast know what is happening.
- Review 6 months or yearly once. Search for better plans, cheaper rates, better service. See if you retirement is as per plan. Br ready to change the plan after major events like marriage, kids, promotion etc.
Remember investment is LAST STEP in financial planning.
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