5 Top Tips for Financial Planning in 2018

Another splendid year has gone. A new year has come. You must be thinking of rectifying your all mistakes which you have made in the year 2017. At the same time, you will be hoping for better wealth creation in this year 2018. It is very good to look back or assess your portfolio every year. If you think some of your investments are not generating the result to the expectation you re-orient your portfolio. Allocate your assets according to your goal to be reached. Here are 5 top tips for financial planning which you should take care in 2018.

  1. Contingency Amount:

Contingency amount is the money which will take care of you in case you become jobless or there is any medical emergency due to which you are unable to work and hence regular income stops.  Nothing is permanent. It may happen that one fine day you are fired from your company and management tells you not to come from next day.

You need to have money to pass those tough times. It is recommended to save at least 3 months expenses in your savings bank account. Somebody can save up to 6 months monthly expenses as the contingency amount. The money should be easily accessible to you in case of requirement.

Hence, don’t put this money into such an account it does not get liquidated easily. Savings bank account is the ideal for keeping contingency amount. Though savings bank fetches low-interest rate (3.5% annual) some savings bank account gives you more interest on deposit of higher amount.

Also Read: How to get highest savings account interest rate

  1. Term Insurance:

When you are on the journey to reach the financial goal there are risks which can jeopardise your family’s financial goal. To mitigate the risks you need insurance. If you have dependents in your home, you need to have a term insurance for yourself.

This is a life insurance and it will take care of your family members when you are not around them. Typically a term insurance with coverage of 10 times of your annual income serves the purpose.

Term insurance does not give you a return over the maturity. Usually, the term insurance has very small premium.  A policy with Rs 1 Cr coverage will cost you as minimum as RS 6000 per year.

Endowment insurance covers insurance coverage as well as return benefit. It is advised not to fall into the trap of Life insurance as an investment. It will give you very less return (6-7% annual). Many people buy the LIC policies for tax benefit. This does not give them proper insurance as well as investment.

The higher premiums for a less insurance coverage and less return make the product less attractive for investors. You can easily go ahead with term insurance which will cost you less for the same amount of insurance coverage.

Are you still confused? Read the article Which Life Insurance Policy to Buy for better understanding.

  1. Health Insurance:

Health Insurance is the key parameter for comprehensive financial planning. Younger people are very much reluctant to spend on health insurance premium. Moreover, a small amount of health insurance from employer places people in a comfortable position not to go with personal mediclaim.

A sudden hospitalization may eat all your savings which you have saved. The medical costs are rising exponentially. A right amount of health insurance is very much important for you as well as your family members.

Always, buy a health insurance for yourself and family members. If your parents are old, buy a separate health insurance for them. Including your old aged parents in a family floater will cost you more. This health insurance will also serve you in the period between your two jobs.

Also Read: Top 5 Tips to Save Money on Health Insurance Premium

  1. Start Savings as Early as Possible:

After mitigating all the risks of the financial journey we should concentrate on investing. Start investing from the first income of your life.

If you start early, achieving your financial goal will be easier and smoother. Though it is difficult to think of retirement at a young age of 25-28 years. But the early investments will compound and you will reach your goal by saving less per month.

As an example, if you are 25 years age and save Rs 5000 per month for 25 years you can reach up to Rs 62 Lakhs. If you continue to invest up to 30 years you can reach up to Rs 1.03 Cr. See the difference of last five years which gives a return of more than Rs 40 lakhs. (Considering 10% annual interest and compounded yearly)

Read another article on the power of compounding by which you will know how it can do magic for you.

  1. Invest in Equity:

The most important in financial planning is investing and investing in proper assets. Asset allocation according to your risk taking capability can give you good return over the years. Combined return on all investment should be more than the inflation. Read the article on Getmoneyrich where you can find the importance of equity beautifully explained.

If you want to grow your money, equity is the best route to invest which will grow your money. Equity has also the power of giving you return which can beat inflation. There are two ways of investing in equity. One is investing in the stocks directly and another is through mutual fund route. For investing in stocks, you need to study the market and follow it regularly. This is difficult for the persons with a full-time job.

Instead of that, you can depend on a professional who can help you to manage your money in an equity mutual fund. Those persons are called fund managers. Start a Systematic Investment Plan (SIP) with an equity mutual fund for regular investment. Automate your investments through ECS mandate to your banks which will ensure regular investment.

Stay invested for a long-term and reviews your portfolio at least once in a year. Do necessary changes if it does not give you the return satisfactorily.

It is always recommended to invest in a direct mutual fund. Direct mutual funds have no brokers. So there is no commission and expense ratio of the fund is less. As the expense ratio is less it gives you more return compare to the regular funds. Know how you can invest in direct mutual funds online easily.


With the above five tips, you will surely achieve a better financial future with proper balance. The most important point which you should always remember is investing early. This is the keyword for you. Invest from tomorrow means you have missed one day to achieve your goal.

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