Financial Planning

This is the First Chapter in our Step to Step Guide towards . Our Step to Step Guide Covers all aspects for , Mutual Funds, Insurance & Stocks from how to Pick To , What are these Terminologies to What should be your Ultimate Financial Goal Financial planning is a process of setting goals (For example buying a house/car, child’s education/marriage, retirement corpus etc), assessing income, assets, investments, expenditure and liabilities, estimating future financial needs, and making plans to achieve them. There are many elements which are involved in financial planning, including budgeting, investments, Taxes, estates, retirement, insurance etc.

Einstein calls it the 8th wonder of the world. It has power to create enormous wealth for people who persevere and hold on to it. This is compounding rate of return. Compounding return is nothing but earning returns over returns as well as principal. The wealth created by compounding rate works in favor of those who have larger earning period remaining in their life. I will worry about it later, I am young and I will have fun for now. While this is certainly something that all of us do in our young age, we have to also build a discipline to save a part of our income and invest to reap benefits in future. The discipline that we build now will keep us in good stead years later. Let me show the power of compounding.

Saving 1000 Rs.

Returns Percentage/Years 3 Years 5 Years 10 Years 20 Years 30 Years
10 % 42,130 78,082 2,06,552 7,65,696 22,79,395
15 % 45,679 89,681 2,78,657 15,15,954 70,09,820
20 % 49,600 1,03,454 3,82,363 31,61,479 2,33,60,800

Since its inception in 1980, the returns from the Sensex has been around 17% compounded annualized, which is also a reflection of corporate earnings growth. Historically over the last 10 years, some MF schemes have given returns in excess of 25% CAGR. Regular savings exhibit a compounding force and inculcate a sense of Savings discipline in the individual, thereby acting as a WEALTH BUILDER tool in the long run.

Making Most Out of the Money

Financial Planning plays a crucial role in helping individuals get the most out of their money. A good plan can help in creating long term wealth and provide considerable immunity against fluctuating economy. It also provides protection against the unexpected events like loss of income or major illness. Financial Planning is different for different people and depends highly on income level, age, risk appetite, responsibilities etc. What suits one person may not be suitable for another. However there are some components which remain common across plans.

Life is not always a bed of roses. Be sure you are properly insured for medical, life and property when things don’t go as you plan. Our ‘Basic Plan’ can help you identify how much insurance you need to protect your family. Many people buy Insurance either to save tax or as an investment without knowing the quantum of insurance they actually need for protection. It is important to have an emergency fund, an integral part of any financial plan. And if you planned right when things were good and have a balanced portfolio, it should help you get through the tough times and come out just fine.



  • Investment Planning:Planning, creating and managing capital accumulation to generate future capital and cash flows for achieving pre-determined goals and spending
  • Insurance Planning: Managing cash flow risks through risk management and insurance products
  • Retirement Planning: Planning to ensure financial independence at retirement including PPF,EPF and other pension plans
  • Tax Planning: Planning for the reduction of tax liabilities and the freeing-up of cash flows for other purposes
  • Real Estate Planning: Planning for the creation, accumulation, conservation and distribution of assets


Are :

  • Save regularly, invest regularly
  • Start early
  • Use tax shelters
  • Investment returns should exceed the inflation.


Where to invest your money

Since you are in your 20s, you can invest major part of savings in equity or equity fund which will not only protect your principal but will provide a healthy return. You also need to put 3-6 times your monthly salary in bank to face any emergency. Most importantly, you should have long term view of your investment. Remember that the 8th wonder works in long term. Let’s see what options you have in investment space.

1. Equity & Equity Mutual Funds: Equity investment is known to give the highest returns. This includes individual stocks, diversified equity fund, sector equity fund, index funds etc. Over 20 year period between 1990 and 2010, Nifty has given an annualized return of more than 20 per cent. However the variability of returns is high which makes it riskiest of them all. The best idea is to find few blue chip firms or a well-diversified mutual fund and invest for a long term. A mutual fund is a fund that invests in a set of companies to diversify the risks (means if few companies go down, few others may go up to save your capital).

2. Bonds & Debt Funds: There are good quality bonds available from Government and Companies. These are fairly safe and returns can be between 8-12 per cent.

3. Safest Instruments: There are others which are very safe, such as PPF, PF, Bank Deposit but they have lesser returns. Your company anyway does the PF for you.

4. Others: Other options could be ULIP, Gold ETF, and Index funds. As a general rule, young people should invest a big part of their savings in equity or equity mutual fund. There are generic rule such as subtract your age from 100 and you should invest that much percentage of your saving in equity & equity mutual fund. If you are 25 year old, you should invest 100-25 = 75 per cent of your saving in equity & equity mutual fund and rest 25 per cent in high grade bonds or bond funds. The typical returns from different financial instruments are as follows: But before you start investing in the market, you must have 3-6 months gross salary in your savings account for any emergency. Here is a typical asset allocation for a 25 years old person (assuming you already have sufficient money in your savings account for emergency purpose) Building a strong foundation for your future: Secondly, have a long term view of your investment. If you look at any stock price or NAV of mutual fund, the prices go up and down in short term but generally go up in long term for good stocks and mutual funds. And lastly, learn about investment, planning, and don’t hesitate in taking professional help. You work hard in your youth; it is natural but to lead a comfortable life when you retire. You deserve it.

Click on the below Links to Read More about:
Lesson 1: Why Financial Planning?
Lesson 2: Power of Regular Savings – Part 1
Lesson 3: Power of Regular Savings – Part 2


Tax Saving:

Lesson 1: Income Tax Slabs

Lesson 2: Understanding Your Pay Slip

Lesson 3: How to Calculate Income Tax

Lesson 4: Tax Saving Techniques

Lesson 5: How to File Income Tax

Lesson 6: How to check income tax refund status?


Mutual Funds

Lesson 1: What & Why Mutual Funds?

Lesson 2: Different Kinds of Mutual Funds

Lesson 3: Systematic Investment Plan (SIP)

Lesson 4: Tax Saving Mutual Funds(ELSS Schemes) & Top 10 Best Perorfming ELSS Funds

Lesson 5: Balanced Mutual Fund

Lesson 6: Debt Mutual Fund

Lesson 7: Fixed Maturity Plans

Lesson 8: Which is the best performing mutual fund?



Lesson 1: Life Insurance – Why &  How Much?

Lesson 2: Insurance & Types

Lesson 3: Term Insurance

Lesson 4: Endowment Policy

Lesson 5: Guarantee Money Back Policy

Lesson 6: ULIPS

Lesson 7: Hard Facts about New Ulips

Lesson 8: Pension Plans or Retirement Plans

Lesson 9: Child Insurance Plans

Lesson 10: Which Life Insurance should I Pick?

Lesson 11: Health Insurance

Lesson 12: Home Insurance

Lesson 13: Auto Insurance

Lesson 14: Mortgage Insurance

Lesson 15: Comparison between PPF vs LIC Jeevan Anand

Lesson 16: LIC – Retire & Enjoy plan



Lesson 1: Things one must know before taking a Home Loan

Lesson 2: Advantages of a pre-approved home loan

Lesson 3: Things to consider before buying a home
Lesson 4: Essential things to check before buying Home



Lesson 1: Why Stock Markets?



Chapter 1: How to invest in Gold?

Chapter 2: What are the returns offered by Gold in Long term?

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