An ideal financial plan
To achieve your long term financial goals, you must have a financial plan. A financial plan is a process of estimating the capital that you would require in the future to become financially secure. As life is uncertain and full of certain contingencies, having a financial plan will ensure that you achieve all your financial goals.
It is of primary importance that you make a financial plan that is ideal and is according to your lifestyle. Here are some points which will aid you in making a financial plan:
S.M.A.R.T financial goals
Identifying and setting financial goals is the essence of any financial plan. Without financial goals, there won't be any motive to your financial plan. An ideal financial plan requires your goals to be S.M.A.R.T. For a goal to be an S.M.A.R.T goal, it should be:
- SPECIFIC by stating the goals to be achieved with the money involved.
- MEASURABLE by exactly estimating the monetary amount.
- ATTAINABLE by setting goals which are attainable.
- REALISTIC by setting goals which can be achieved given the market trends and your financial condition.
- TIME BOUND by setting a time limit to achieve the financial goals.
- Once you have set S.M.A.R.T goals, you can start investing your resources to meet these goals within the required time limit.
Your financial plan should provide adequate provisions for unfortunate events and emergencies. It should contain investments that can be liquefied when there is a sudden need of cash. You can look to invest in mutual funds through SIP (Systematic Investment Plan) which will provide you a disciplined approach towards investment as you can invest as little as Rs 500 per month and withdraw when you are in need of money. Another investment you can opt for is a life insurance policy which will provide you a life cover in the form of death benefit and a maturity benefit at the maturity of the term.
An ideal financial plan should always be flexible in the sense that you can change it according to your lifestyle. With time, your income will increase and so will your needs and your standard of living. The financial plan should have the ability to adjust according to the changes in your financial needs and your social status. If your financial plan is rigid and doesn't allow for adapting to change, there is a fair possibility that you won't be able to achieve your financial goals.
A financial plan should be simple; it should be readily understood and managed by you in every sense. As it will be you executing the plan at every stage, you should make it manageable so that you can monitor your investments quickly without having to spend a considerable amount of time. A simple financial plan will ensure that you won't make any complicated mistakes and achieve your financial goals efficiently.
An ideal financial plan should be able to anticipate future expenses and market trends after a thorough understanding of the basics of the market and the financial condition of the person making it. It is only by anticipating future expenses that the financial plan can provide a monetary value to the financial goals. In simple words, the ability of foresight would mean that besides the needs of "today," the financial plan also provides for the requirements of "tomorrow".
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