These are general guidelines or thumb rules for financial planning applicable specifically to India and generally worldwide.
- 30% of your income must be used for “monthly living expenses.”
- 30% of your income must be used for “Liabilities Repayments – (if any).”
- 30% of your income must be “SAVED” and “INVESTED” for your retirement.
- 10% of your income must be spared for vacations and other entertainment.
- 6 Months expenses must be available for Emergency fund (should be invested in LIQUID FUNDs of Bank Fixed Deposits)
- “Home loan” must be registered and apply on both “husband and wife name.” (Both can get benefits on Home loan Tax benefits)
- Buying “Second house for investment is NOT advisable” ( -Why? Because it will fetch you only around 3% annual returns)
- After 45 years of age, “DO NOT enter into any BIG LIABILITIES”. Higher education of children and wedding of children will happen around 45 to 50 only, so plan now for the same.
- Have joint account in your bank savings account preferably with your spouse.
- Property must be “REGISTERED on both Husband and wife name”. (As per law – after husband first legal heir is wife, after wife it will go to children only).
- Check on “Nominations for all financial instruments.” If not nominated, do it NOW.
- Only in insurance policy, Claims payable to Nominee. In other financial instruments, legal heirs certificate is must to get the settlement.
- Must have “Term Insurance” to financially secure future of your dependents. “Conventional Insurance products” can serve as Debt oriented investments and provide assured returns in the present falling interest regime with Tax benefits.
- Don’t take any financial investment decisions for “EMOTIONAL reasons or EGO”. Also avoid last minute tax saving investment decisions, plan it in advance.
- MEDICLAIM is must (even if you have “Group Mediclaim” coverage from your employer). After retirement when there is no Mediclaim coverage from employer then your personal Mediclaim will come handy. After 50-55 years of age, it’s very tough and costly to get Mediclaim).
- Note about your “LOCKER”, Only one lakh is payable by bank, if theft or fire happens at bank. Get Insurance for your jewelry. Also it is highly advisable to declare your gold and jewelry in your income tax returns.
- Even the Fixed deposits of ALL Banks – SBI, ICICI, HDFC Banka and all others are guaranteed only for one lakh rupees by government of India.
- Must know all “Tax implications.” You CANNOT avoid paying tax and you should not do it. Minimize it by way of TAX Planning and Investments. There are several VERY EASY and LEGAL ways to minimize your Tax outgo.
- All “financial documents must be kept safely” and keep family members informed of the same.
- “Financial investments” must be followed through “Personal Financial Planner/Advisor”.
- “Review your financial health every year or better every six months”
These are general suggestions, personal Finance and investment decisions depends upon case to case. Please contact me and I can help you with all the above.
Thanks and have a Healthy and Wealthy Life.