Follow Us :

This article is all about Financial Planning, Retirement Planning, Discipline Investment, Financial security, Personal Finance, Financial Freedom – ALL IN ONE. And show you how disciplined investing can do wonders. This article is about financial prudence for safe future of family and a solid planning for happy retirement. These are financial advice that even the common man understands. I request everyone to follow. 5 things that are very, very necessary for any person. Whether you know about share market or insurance or mutual find. These are really basic advices of FINANCE. And there is no Rocket Science. All can be done by self. These things will give so much financial protection to your family. So advise to cultivate 5 financial habits to safeguard your family from any uncertainty and also give secured retirement planning. Here are 5 things to do for FINANCIAL DISCIPLINE OR FINANCIAL PLANNING for everyone.

Let’s start Simple habits of Disciplined Investment.

Let’s dive in.

FINANCIAL PLANNING HAS TWO PARTS   – 1. SECURITY 2. STABILITY   

SEGMENT -1 – SECURE YOURSELF FOR ANY UNFORESEEN EVENTS

1. Health Insurance (Mediclaim) Min cover 10 lac + Personal Accident Policy Min cover 10 LAC

Mediclaim is very helpful in case of any health related emergency that comes to you nowadays the cost of any operation has gone up from Rs 5 lakh to Rs 20 lakh. It is not possible to withdraw such a large amount or you have to reduce your savings. Health Insurance is really important. Health Insurance provides coverage on the medical claims within the tenure. Make sure Every Family member is covered. Buy Family Flotter. Even children must be covered. You can also add critical illness cover and accident cover as add on for more coverage& security

Personal Accident policy is specifically for accident damages or death. Must have for own and spouse. Min. Cover of 10 lac each.

2. TERM LIFE INSURANCE (including disability rider) – MIN COVER 1 crore

Here I am not talking about normal life insurance policy. TERM LIFE INSURANCE is not like any other policy. Term insurance means that after the untimely death of the earner, his family gets financial support. Policy cover must be 20 times of Income. The premium amount is not big. . For example. A young man can get a cover of 1 CRORE against 15000 annual premium. Meaning if one dies prematurely before 70 years, 1 crore amount will be provided to nominee. Term Insurance provides coverage for the premature death of the policyholder within the fixed term whereas Life Insurance provides coverage on the maturity of the policy. No insurance agent is required for this. By contacting any private bank branch directly, you can. This basic product there is no rocket science in it. You can add as add on “Disability” rider also. Term insurance is for a set period of time, for example, 30 years, 40 years, or as you may choose. You pay a certain premium for a fixed sum insured for the entire tenure of the plan. All your premium payments are eligible for a tax deduction while the sum insured is non-taxable.

SEGMENT -2- STABILITY FOR RETIREMENT & FINANCIAL FREEDOM

Now , Here is main part of Article which is about PLANNING FOR BUILDING A CORPUS FOR retirement over the period of time

ASSUMPTIONS- Below calculations assume that one working couple saving yearly 3 LAC and Investing systematically in a disciplined way yearly in PPF, NPS, MF SIP in below weightage. The Underlying assumption is that upto 40 age, you must have saved funds to secure house and after 40 age, your monthly Income should be sufficient to accommodate 1. Child’s educations fees 2. Household expenses and 3. Monthly Rent/EMI if any and, after that, the couple must save 3 lac yearly anyhow to make sure to reach goal in 20 years as below.  I just made tables having in mind age 40 . You may prepare your own Tables with your current age in Mind.

GOAL = TO HAVE atleast 1.37 CRORE ( say enough)  fund at 60TH AGE FOR RETIREMENT

STRATEGY- INVESTING 3 Lacs   in   PPF  + NPS  + MF SIP

Here is how it will be done

1. PPF-PUBLIC PROVIDENT FUND PER ANNUM Rs. 150000

BRIEF-Rs. 150000 yearly for 15 years (extend for 5 years). All tax free return + 80C deduction yearly. ALL TAX-FREE at Maturity. Mostly double amount in return at maturity.

DETAILED- Do Open PPF account at least for one person in Family. It can be opened in Post and It can be opened in any bank also. 7.1% interest which is TAX FREE. In addition investment will be allowed as deduction in 80C. Do make yearly contribution of 1.5 lakh per annum for 15 years. It is 100% SECURE too. Also 5 years can be extended too. You can earn 37 lakh with only 22.5 lakhs in 15 years and 57 lakhs with 30 lakhs investment in 20 years (Almost double).This is still the best investment option. TAX FREE even at maturity. Magic lies in last 5 years. You just check table below how amazing returns can be availed. Its because of Power of Compounding.

Check below table to understand the return and Maturity Fund accumulation.

return and Maturity Fund accumulation

2. NPS – NATIONAL PENSION SCHEME PER ANNUM Rs. 50000  

BRIEF- Min Rs. 50000 yearly in NPS. Also Get Extra deduction of Rs. 50000 over Rs. 1.5 Lacs in 80C. At Maturity – 60% withdrawal. And remaining 40% converted to Annuity for  monthlty Pension till death.

DETAILED- NPS is a government-sponsored pension scheme. The scheme allows subscribers to contribute regularly in a pension account during their working life. On retirement, subscribers can withdraw a part of the corpus in a lumpsum (60%) and use the remaining corpus (40%) to buy an annuity to secure a regular pension income after retirement. Most banks, both private and public sector, are enrolled as NPS scheme provider. individuals can claim an additional deduction of up to Rs 50,000 under Section 80CCD(1B), which is in addition to Rs 1.5 lakh permitted under Section 80C. If the subscriber dies before 60 years, the entire accumulated wealth would be paid to the nominee/legal heir of the subscriber. Scheme invests in 75% equity and 25% in Govt bonds. At the maturity of 60th age, 60% amount will be returned and you will receive pension till death, From Annuity of 40% amount

Check below table to understand the return and Maturity Fund accumulation.

return and Maturity Fund accumulation image 2

Maturity Fund accumulation

3. MUTUAL FUND SIP -MIN. 8350 PER MONTH Rs. 100200 YEARLY

BRIEF- SIP in Mutual Funds. Atleast MIN. 8350 PER MONTH i.e Rs. 100200 YEARLY DETAILED- Investing in stocks and mutual funds may help you earn inflation-beating returns over time. FD / Bonds will not give return (rather depreciate your Savings). So make Invest in Mutual funds (Start Monthly SIP if Lumusm is not possible). This is best for to those who don’t have time & knowledge in Equity. SIP is product where indirectly you are investing in stock market with proper planners managing funds. Stocks are riskier as compared to equity mutual funds. You can bifurcate Monthly Sip in Balanced Fund / Index Funds / Global Funds / Debt Funds / Top 100 Funds / Top 500 Funds etc. The diversified equity mutual fund / NIFTY funds spreads your investment across sectors and industries and hence, reduces the volatility in your investment. In case of Stock market directly, you have to conduct extensive research to pick the right stocks before investing your money. In the case of equity mutual funds, the research is done by experts, and a professional fund manager manages your investment. This service is not free and comes with annual management fees that are charged by the mutual fund house. AN SYSTEMATIC INVESTMENT in MF will lead to you 10% to 12% returns.

Check below table to understand the return and Maturity Fund accumulation.

SIP in Mutual Funds

Here is a Final Tabular view for all 3 investment avenues and its maturity at age 60 . Investing 3 lac per year. Total 60 lac and you get 1.37 crore at 60 age. More than Double. That is power of Disciplined Investment. Disciplined investment can lead to amazing returns and starting that Investment journey from early age will give enough span of Long duration for amazing results.

Financial Planning for Retirement

Monthly Income Rs. 75000 after 20 years is, I think, enough for a couple to survive. 75k per month after 20 years.  That means 25k-30k per month of current year keeping 6% Inflation.  After 20 years, Person won’t be having EMI to pay, even children would be completing studies .So 25k is enough for food and electricity and monthly household expenses In my opinion.

PS- This is commoner’s guide to gain awareness about Financial Planning.  Also, I am not Financial Expert but this is what I have been suggesting as part of making Corpus in 20-25 years for retirement. I have been writing & updating this for so long. I believe in this FINANICAL PLANNING.  Hope you find it useful. I made this guide keeping Age 40 in mind. However, the best advice would be starting Investment journey as soon as possible when you start earning.   You may prepare your own Tables with your current age in Mind.

Join Taxguru’s Network for Latest updates on Income Tax, GST, Company Law, Corporate Laws and other related subjects.

One Comment

  1. Prashant Chitnis says:

    The article covers all important aspects of Financial Planning and Tax Planning. It gives a complete picture of stable portfolio building and risk management via life and health insurance. Thanks for such an analytical presentation covering vital calculations.

Leave a Comment

Your email address will not be published. Required fields are marked *

Search Post by Date
March 2024
M T W T F S S
 123
45678910
11121314151617
18192021222324
25262728293031