As we approach Navratri, I wish you all a joyous and prosperous festive season ahead. To help you stay on track with your financial goals during this time, here are nine essential financial tips to ensure your journey towards financial freedom is smooth and secure.
Build an Emergency Fund
Ensure you have at least six months’ worth of living expenses saved in a bank fixed deposit or a debt mutual fund. This serves as your emergency fund for unforeseen situations and ensures you are financially prepared for any rainy days ahead.
Review Your Asset Allocation
Revisit your financial plan to make sure your investments align with your financial goals. For goals within three years, consider bank fixed deposits/recurring deposits/debt mutual funds. For longer-term goals (beyond three years), a combination of hybrid mutual funds, equity mutual funds, direct equities and gold should be preferred.
Do Sufficient SIPs
Ensure you are investing enough through systematic investment plans (SIPs). Ideally, at least 25-30 per cent of your in-hand monthly income should be allocated towards SIPs in mutual funds/stocks/gold to help you build wealth consistently over time.
Make Lumpsum Investments
In addition to SIPs, consider making voluntary lump sum investments in the above longer term assets, whenever possible. Periodic lump sum contributions can significantly boost your overall wealth.
Increase Your SIPs Annually
As your income grows, so should your investments. Make it a point to increase your SIP amounts every year to keep up with your rising income. Again, aim for at least 30% of your monthly income towards investments.
Stay Invested
One of the most important rules of investing is to stay invested until your financial goals are met. Avoid treating your investments like an ATM. Pausing or redeeming your investments frequently disrupts their growth potential. Instead, try to raise an overdraft loan against your investments, to help whenever needed.
Health Insurance
Ensure that you and your family are adequately covered with comprehensive health insurance that includes necessary product features. A minimum cover of 25 lakhs per family member is recommended to safeguard against any major health-related expenses. Never solely rely on your employer’s health insurance.
Term Life Insurance
A term life insurance plan is essential for the financial security of your loved ones. Ensure you have a cover amounting to 10 times your annual income, plus any outstanding loans. Avoid combining insurance with investment plans—stick to a pure term insurance policy for adequate coverage.
Consult a Financial Advisor
Seek the help of a well-qualified, full-time financial advisor for making a financial plan and executing it. They will make your job easy. Never do-it-yourself in the case of wealth creation, financial goals, and investing.
Wishing you a financially secure and prosperous Navratri!
(The writer is a Chartered Accountant and CFA (USA). Financial Advisor. Views personal.)
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