Tips For Best Financial Planning for Salaried Employee

To build a strong financial backbone, you need to have a robust financial plan in mind, especially if you’re living a pay check-to-pay check life. Doing so will ensure that you have enough money to evade the frustrating month-end cash crunch and, in the long run, ensure that your future is financially secured.

Don’t know where to begin? Well, here are some tried-and-true tips for efficient financial planning for salaried employees.

What must a personal financial planning include?

Your financial plan must include the following-

1. Financial goals: Mention all your short, medium, and long-term goals in detail.

2. Budget: Creating a budget with your monthly expenses can help you better manage your necessities and savings.

3. Net worth: Determine your total assets and liabilities to get a better picture of your financial health.

4. Suitable financial plan: The plan should be based on your age and financial needs.

5. Emergency fund: It is important to create an emergency fund and plan for retirement to meet your financial needs effortlessly.

Best Ways to Create Investment Plans for Salaried Employees

Here’s how you can create an investment plan as a salaried employee-

Create a budget

If you haven’t done so already, creating a budget is the necessary first step for efficient financial planning. Once you’ve budgeted for all your spendings – needs and wants included – you can make a list of discretionary spending.

Start by finding areas where you could dial down your expenses. For instance, you can reduce your food budget by shopping at a relatively cheaper grocery store or eating out less frequently. Perhaps you could temporarily cut out your Netflix or Prime subscription if you’re not using it often.

If you ever receive a windfall, like a bonus or tax refund, you can put it into your savings account or invest it.

Invest your idle funds

Let’s face it; even though savings accounts offer respectable returns, they’re not enough to outpace inflation. For that, you need to park your money in other investment options, such as FDs, stocks, mutual funds online, etc.

Choosing the right instrument can be a bit daunting. So, the best place to start is to define your financial goals first, both short-term and long-term. Based on that, you can select which investment tool works the best for you.

Make sure you balance risk with returns. Don’t always go for high-yielding investment vehicles, as they can break down when the market collapses.

Additional Read: 10 Tax Saving Tips for Salaried Individuals

Buy insurance

Here’s a top tip for best financial planning for salaried employees – buy insurance. Because emergencies can knock at your door at any time. And the assurance that you won’t have to pay for the medical bills or the cash crunch from your savings is a worthwhile one.

And there’s no need to pay hefty premiums from the start. You can start slow and ramp up your premium as per your professional growth. Make sure to at least have life insurance and a home insurance plan.

Prioritise clearing debt

Another important part of any financial plan for salaried person is clearing outstanding debt. Debt traps are easy to fall into and difficult to get out of. So, make it a priority to always clear your credit card bills and EMIs without letting them stack up. Getting buried under interests can be devastating for your finances in the short term.

In the long run, it could hurt your credit score, truncating your borrowing capacity.

Retirement Planning

When you’ve been working all your life to provide for your family, you should be able to retire comfortably without worrying about the finances. For a financially secure future, it is important to contribute towards a retirement fund regularly.

Start by calculating how much you need to retire comfortably while meeting all your necessary expenses and any unexpected costs, such as medical expenses. You can use a retirement calculator to estimate how much you need to save each month to reach your goals.

Consider investing in various investment plans and schemes, such as NPS, mutual funds, and PPF, and diversify your retirement portfolio with a mix of stocks, bonds, and mutual funds to grow your funds as you approach retirement.

Additional Read: What is Goal-Based Financial Planning?

It’s your turn now

By following these proven tips, you can easily prepare for the future and ensure that any financial emergency doesn’t force you on your back foot. Being patient is also important since building and executing a financial plan paycheck-to-paycheck can take time and effort.

You can also make financial planning and investing easy by downloading Tata Capital’s Moneyfy app. Effortlessly plan your investments, automate SIPs, and track your wealth growth with our feature-rich mobile app.

Learn more on our website today!

FAQs

What is financial planning? Why is it important for salaried employees?

Financial planning involves creating a strategy to manage your income, expenses, investments, and savings to achieve your short-term and long-term financial goals.

What are the best investment options for salaried employees?

Some of the best investment options for salaried employees include mutual funds, ETFs, SIPs, and fixed deposits. Diversifying across these options can help balance risk and return, allowing you to achieve your financial goals while managing risk.

How should I start my financial planning journey as a salaried employee?

Begin your financial journey by assessing your financial situation, setting clear goals, and creating a budget. Consider building an emergency fund and explore investment options to meet your goals effectively.