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10 Rules for Beginners to Follow While Doing Financial Planning

Published on Mar 30, 2021Updated on Jan 24, 2024

10 Rules for Beginners to Follow While Doing Financial Planning

Taking an active role to manage your funds is a sign of a good financial planner. If you look around, you will find an abundance of financial planning advice that can overwhelm any beginner. . However, it is the need of the hour if you wish to become financially independent in your life. Therefore, when it comes to financial planning for beginners, you need a plan of action. 

To kickstart your financial planning journey, we have compiled these 10 rules that may be followed by every newcomer.

Take a look.

1. Manage your Money:

Managing your money does not require you to have a degree in finance. All you need is a bit of dedication and commitment as you take your baby steps towards the world of financial planning and management. Ensuring that you are en route to building a corpus gives your greater financial independence as you mature.

Opting to go a systematic route of regular saving is a great start. Typically, you should be committed to putting aside at least 10% of your monthly income towards your savings in a channel that accrues interest. This can help you build an emergency fund as well as a nest egg for the future.

2. Regulate Your Expenses Wisely:

If you see that you are struggling to make ends meet, then you are probably living beyond your means with a lot of unplanned expenses. While financial planning to the absolute ‘T’ may not always be possible, making a budget with putting your expenses under various headers such as EMIs, investments, and savings can help you to correct your course. It will give you a clear picture of how your money is being spent, how much debt you are in, how many unnecessary expenses you can cut, and also how much you can contribute towards an emergency fund to meet unforeseen expenses.

Having said that, there may be times when you may wish to make a high-value purchase. Instead of dipping into your savings, you may in fact apply for a personal loan online that will help you to meet your immediate financial obligations.

3. Maintain a Personal Balance Sheet:

In order to take your financial planning to the next level, it is imperative that you start a personal balance sheet. Jot down your liabilities like a car loan, home loan, credit card balances, etc. and assets such as bank balance, value of investments, value of fixed assets such as property, etc. in black and white that will help you arrive at your personal net worth.

Ideally, your net worth will increase gradually as you keep minimising your liabilities with timely repayments. On the other hand, if you plan to invest in assets then you must choose instruments that will appreciate in value over a period of time.

Must Read: Different Types of Loans in India

4. Handling Surplus Cash Judiciously:

While having access to surplus cash is great, you should have a plan in place to manage it judiciously. Surplus cash lying around can lead to unnecessary overspending. Instead, you can use it to make yourself financially stronger and self-sufficient.

Consider investing your extra cash to combat future inflation. Ensuring that it is being channelised to build on your corpus that will help you to meet both your short and long term financial goals. In the meantime, if you are in need of liquid cash, then you should consider taking out a loan rather than disturbing your invested savings which are accruing interest. Most financial institutions like SMFG India Credit provide competitive personal loan interest rates with easy repayments through fixed monthly instalments.

5. Design Your Personal Investment Portfolio:

Another daunting task when it comes to financial planning for beginners is to create a personal investment portfolio. This is a must-do since this marks the initiation of your wealth accumulation chapter in life.

Check out the various investment instruments such as equity, debt, and cash that can play a part in your asset allocation. Having a mix of investment instruments ensures that you can counter inflation as well as claim tax breaks. It is also important to diversify your investments and align them to meet your life goals. While long term channels are great to accumulate your corpus, some short-term avenues can be aligned to meet your financial obligations in the near future. 

6. Planning for Retirement:

Even though retirement may seem like a lifetime away, it is essential that you start planning for it from the day you receive your first pay-check. Inflation is only expected to increase, and healthcare expenses may skyrocket beyond recognition. Take the help of a retirement calculator to calculate your contribution towards your retirement fund that will help multiply your corpus by taking into account the magic of compounding.

Therefore, the key is to start your retirement planning as early as possible to ensure that you are financially independent in your sunset years.

7. Manage your Debt Wisely:

You will be left with nothing at the end of the month if you are not able to skillfully manage your debts. This can lead to fresh borrowings just to consolidate your debt and pay them off. If you are indeed at a stage where your debts are out of control, then apply for a personal loan online from SMFG India Credit that will help to break this debt trap.

Take the help of a personal loan EMI calculator that is available on the SMFG India Credit website to calculate the monthly instalments that you will be repaying to the lender.

8. Get your Risks Covered:

Always bear in mind that your property and life is vulnerable to risks that may eventually lead to loss of income putting your loved ones in financial jeopardy. Hence, other than simply focussing on wealth accumulation, financial planning for beginners should also include wealth preservation.

In other words, your financial planning should be a combination of instruments that build your corpus along with essentials like life insurance, healthcare plans that cover your risks and keeps your family financially strong even in your absence.

9. Planning your Estate:

Even if you think you do not have an estate, you actually have one. Your home, car, funds available in your current and savings bank accounts, fixed deposits, investments are all assets that constitute your estate.

Financial planning also includes planning for your estate as soon as you start accumulating assets. Draw up a list of beneficiaries and divide your assets proportionately among them. This will help in identifying ownership in case you meet an untimely demise.

Must Read: Give Your Home a Makeover with a Personal Loan!

10. Planning your Taxes:

Tax planning is a major component of financial planning for beginners where you can optimise your returns by investing in tax efficient instruments. Make sure that you take advantage of all applicable tax exemptions and deductions that can lead to reduced tax liability at the end of every financial year.

Final Thoughts

It is best to rely on expert advice on financial planning particularly if you are a beginner. However, by adhering to these 10 rules you can ensure that your plan of action is effective and easy to follow through.

* Please note that this article is for your knowledge only. Loans are disbursed at the sole discretion of SMFG India Credit. Final approval, loan terms, disbursal process, foreclosure charges and foreclosure process will be subject to SMFG India Credit's policy at the time of loan application. If you wish to know more about our products and services, please contact us

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