A financial plan should be for the long term, but can it be for a lifetime? Well, yes, if your life is a monotonous journey with no twists and turns. But life is not that boring, or shall we say, that smooth.
There will be some obvious turns - job, marriage, children, retirement - in your life that will trigger changes in your financial plans. Then there may be speed bumps such as job loss that will require even more careful handling.
All these require detailed planning with foresight, which you may find difficult to handle on your own. You may need expert advice to work out a plan.
WHEN YOU BEGIN TO EARN
It takes long to get over a financial planning blunder. It is, therefore, important to start well and do a continuous review if you want to build a solid base for the future.
When you kick-off your professional career, the pay cheque may not be fat, but you also do not have many responsibilities. Though the urge to spend is high considering that you have just taken your first step towards financial independence, try to save as much as possible for the future. Compounding can help convert small savings into a huge corpus over time.
Even a delay of a few years means you will have to save a lot more to build the desired corpus. Learn to protect your money. Start by building a fund for contingencies.
"One should keep two-three months' salary in liquid funds or savings accounts," says Rajnish Kumar, CEO, Fullerton Securities & Wealth Advisors. Insure yourself, especially if you have dependents or debt to pay off.
"One should buy a basic term plan with sum assured of seven-eight times the annual salary and an individual medical policy," says Kumar.
An individual health plan is a must even if you get a cover from your employer. This is because medical cover costs more as you grow older. Also, the employer's cover may not be enough and will not be available when you quit the job.