planning People often overlook the need for retirement planning till they have almost retired. Rising inflation, increasing costs of healthcare and a higher average life expectancy means a longer retirement period that makes retirement planning indispensable
While there is no right age to start planning, starting early makes a significant impact in the long term. The premium of life insurance plans also increase with age. At a younger age, you are medically fitter and physically sound. This helps in reducing the insurance cost and in turn reduces your premium amount.
Financial planning based on lifestage
Any financial plan should start with defining the key goals you want to achieve. These goals depend on your lifestage:
Single and working
Individuals in this lifestage are financially independent, don’t have any liabilities. A single working individual may have aspirations to purchase a car, expensive consumer durables, an overseas adventure, first home, plan for marriage and so on. At this stage, while a higher proportion of income may be utilised for self consumption, it is important that you build a disciplined savings habit to help you get settled.
At a younger age, you may invest to create a corpus to fulfil your aspirations, while maintaining liquidity to meet exigencies. Further, with increasing age, you need to create a corpus for retirement and a health cover to take care of medical exigencies.
Marriage means sharing of goals and aspirations as well as assets and liabilities. Individuals in this life stage are in a better position to invest for wealth creation goals in the medium term, a plan with a combination of investments and insurance is essential at this stage. The decisions you make at this lifestage have the greatest impact on future financial well being.
Married with young children
This is the time when your income is rising but so are the expenses. A bigger home, regular vacations with family and raising children can easily consume the increasing income.
At this stage, along with wealth creation for yourself, you need to plan for your children’s future. With increasing dependents, adequate life cover becomes more important and should be enhanced to protect spouse and children’s future.
Married with grown-up children
With children growing up, the responsibilities increase significantly and become top priority. At this stage, besides planning for children’s higher education and marriage, an individual also needs to plan for retirement and being free from liabilities. A higher proportion of investments need to be allocated in safe