The year 2020 has been a rollercoaster ride since it began. From a global pandemic to struggling economies to natural disasters, this year has been the ultimate test of human perseverance and fortitude. Despite so much being thrown at us, the world has come together to support each other and keep our hopes up. 

With the lockdown in India still continuing, we’ve essentially been restrained for over half of our year in our homes. With the uncertainty of not knowing when the Covid-19 situation will get over, bolstering their finances should be the priority of every working professional right now. As it is quite obvious, businesses all over the world have taken a big hit because of the pandemic. Many brick and mortar setups have been forced to close their doors and a lot of other bigger firms also had to lay off employees as a cost cutting measure. In times like this, no matter what your line of work is, self-preservation and financial security will be of utmost importance this year and for the near future. 

Here are a few simple ways to start off on your financial planning journey – 

1. Creating Protection Assets – Before you think of investments, it’s important to create your protection assets. Having an emergency corpus (ideally 4-6 months of expenses), sufficient health insurance cover and term insurance cover in place are the three important protection assets. Once these are in place other important insurances like critical illness and personal accident cover need to be looked at. Having these in place will ensure that you do not have to dip in your investment portfolio in case of emergencies like job loss, medical requirements etc.
2. Have A Clear Idea Of Your Goals – When it comes to financial security, the most important thing to focus on is your financial goals. Try to visualise how you’d like your life to be in the future. Where would you like to be? What work would you like to do? How will your family have a comfortable life? Introspect and dig deep to get a true understanding of your and your family’s needs. Not only will this give you a clear roadmap of how your portfolio will look, but it will also keep you motivated and driven to achieve your financial goals the way you want to. 
3. Know Your Risk Appetite – It is important to understand that investing is not a risk free tactic and there is always a chance of losing money or not getting back as much as expected. All investments carry risks of varied degrees. Risk profiling process will help you understand your attitude towards investment and enable you to draft an optimal investment strategy striking the right balance between risk and return. There are three parameters that define an individual’s risk profile – need, willingness and ability.
4. Get Accustomed To Numbers & Jargon – The world of investments and financial planning is choc-a-block with lots of technical terms and formulas to calculate various aspects of your assets and return on Investments. With most of us working from home, now is a great opportunity to utilise your free time and learn a little about how these concepts work. This basic knowledge of financial jargon and metrics will go a long way in helping you gain a better grasp of your money and how you should utilise it.
5. Know Your Taxes – Perhaps the biggest thing that you will have to look into during your time as an investor is tax. First, you must be aware of all the taxes that you are required to pay. Second, you must familiarise yourself with the tax implications of investing in different instruments. Third, you must research and find out all the ways you can mitigate your tax liability. This three step process allows you, the investor, to effectively reduce your tax burden and get the most out of your returns. In case it proves to be too much to handle on your own, get in touch with a certified financial planner or wealth management firm to help you out with your taxes.
6. Be Diverse & Efficient – Any experienced investor will tell you that the maximum gains are achieved with a portfolio that is diverse and efficiently utilises your money to keep your costs as low as possible. Diversification is an integral part of financial planning and must not be ignored. Many new investors try to play it safe by only investing in one type of instrument but they are actually making it harder for themselves to get better returns. Having a good mix of debt and equity basis your risk appetite and goals, and also investments in different markets, will keep you floating even if a particular investment fails or the market you invest in falls.

With these six simple steps you can kickstart your financial planning journey and look forward to a brighter future. Get in touch with one of our certified financial advisors to help you lay the foundation for your financial success.