Important money tips for financial planning - What you must know

Financial Planning is one of the most important aspects of one's investment portfolio. According to tax and investment experts, financial planning has three stages — the nascent phase of the career, mid-career and post-retirement phase. However, one should start zeroing on the financial planning tools in the nascent phase of one's career. If an earning individual has started to plan one's investment and financials in the early phase of one's career, then the pressure to save for the post-retirement phase goes down and hence the long-term investment goals.

Speaking on the importance of financial planning in the early phase of one's career Balwant Jain, a Mumbai-based tax and investment expert said, "This is the phase when you lay down the foundation of your financial edifice and thus needs more planning and attention. If anyone is financially dependent on you, then you should, first of all, buy a personal accident policy, as the probability of death and due to accident and not any disease is the highest and the ability to spare more money is limited is the phase, when you lay down the foundation of your financial edifice this stage. Personal accident policies come very cheaply and the average cost per lakh is between Rs 125 and Rs 200 rupees."

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Secondly, you should buy a health insurance policy for yourself and for your parents as well in case they are dependent on you. The amount of health insurance would depend on the place where you are residing and your lifestyle. "In my opinion, one should have a minimum of five lakhs of health insurance. You should buy a health insurance cover even if your employer provides it because it may happen that your new employer may not provide you it in case you have to leave the present job. In such a situation, your pre-existing disease will not be covered immediately and will have a waiting period of three to four years. In case you have any person financially dependent on you, you need to buy term insurance equal to minimum 12 times of your annual income to safeguard the interest of your dependents. Buy online term plan if possible as it comes cheaper with the same benefits," said Jain.

Batting for an emergency fund a SEBI registered tax and investment expert Jitendra Solanki said, "One should have an emergency fund if he or she is in the nascent phase of one's career. Such funds become handy in the case of job switch or in the worst scenario of job loss, etc." Solanki said that one should chalk out one's financial goals so that the suitable products for the investments can be mapped with the goals of the earning individual.

"Since you have almost 35 years to your retirement age, your ability and aptitude to take risk is higher and thus you can invest in risky products like equity funds. Moreover, since you are not married, buying a house and saving for your retirement should be your clear goals. For the goad of buying your house, you need to save for margin money and depending on the time frame available, you can save in debt funds or aggressive hybrid equity funds. For your retirement goal, you can take higher risks and invest in good performing small-cap funds as these funds generate better returns in the long run. You need to review your goals and investments every year as well as with life changes like marriage and birth of a child in the family," said Balwant Jain.