25 Thumb Rules of Financial planning

Thumb Rule of Financial planning.

1. Ensure that only less than 30 % of your income must be used for *monthly living expenses.*

If it is more than 30% it means you are living beyond your means and you will face a difficult retirement

2. 30% of your income must be used for *Liabilities repayments*, if any..

3. 30% of your income must be *SAVED* and *INVESTED* for your RETIREMENT. This should become 60% if you don't have any liabilities.

4. 10% of your income must be spared for *entertainments, vacations*

5. 6 months expenses must be available for *emergency fund* (should be invested in LIQUID FUND, FD Etc)

6. *Home loan* must be registered and must be applied on both *husband and wife name.* (Both can get benefits on Home loan Tax benefits)

7. Buying *second house for investment is not advisable* (A Survey says - it will fetch you only around 3% return)

8. After 45 years of age, *not supposed to 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.)

9. Have joint account @ Bank savings account.

10. Property must be *registered on both Husband and wife name*. (As per legal act – after husband first legal heir is wife, after wife it will go to children only)

11. Regular check on *Nominations at all financial instruments.* if not nominated, do it now..

12. Only in insurance policy, Claims payable to Nominee. In other financial instruments legal heirs certificate is must to get back the settlement

13. Must have *Term Insurance* to financially secure future of your dependents..

14. *Don’t take any financial investment decisions EMOTIONALLY*, and also Avoid last minute tax saving investment decisions, plan well in advance..

15. *MEDICLAIM is must* (in spite of Group mediclaim coverage given at office) (After retirement there is no mediclaim coverage, after 50-55 years of age, it's very tough and costly to enter into mediclaim)

16. For your *jewelry LOCKER*, Only one lakh is payable by bank, if theft or fire happen at bank. Provided insurance done.

19. Must know all *Tax implications.* You cannot avoid paying tax. But you can minimize by way of tax planning and investments..

20. All *financial documents must be kept safely* and keep family members informed of the same..

21. *You may take the help of a reliable Personal Financial Adviser for Financial investments if you are not sure about how to arrive at a balanced portfolio for your goals.* 

22. *Review your portfolio at least once every six months.*

23. Invest in Mutual Funds at a very young age in the form of SIPs. These will give you better returns over a long run compared to bonds and are better at beating inflation.

24. Invest in PF, PPF, bonds to reduce the volatility of your portfolio.

25. Start Saving now and never underestimate the power of compounding. More savings at a young age will lead to an earlier retirement.

These are general suggestions, personal Finance and investment decisions depends on case to case basis.