A Beginner’s Guide to Financial Planning in 2021

Published On: 11-Aug-2021

While the Covid 19 pandemic took the world by storm, one of the lessons of this crisis is the realization that we must all prepare for any such eventuality in the future. It is imperative to properly plan and manage one’s finances for building a financially secured future. Here is a beginner’s guide to financial planning in 2021 and for the future years: 

Maintaining an Emergency Fund

In the pre-pandemic years, we would have not considered having an emergency fund or it would be on low priority, this requirement now tops the financial plans.

It is always a prudent financial strategy to maintain an emergency fund corpus of at least six months’ expenses and should be utilised in case of emergencies only.  In addition, this fund should be very liquid in nature i.e. in form of cash or in an investment avenue which could be easily converted to cash. 

Staying Prepared for Contingencies with Insurance

While planning for the future, it is always prudent to stay prepared for life contingencies with life insurance and medical insurance. Life insurance takes care for the dependent family, if the earning members meets with any misfortune. Further, the ongoing pandemic situation has also brought in focus the need for medical insurance, since any regular hospitalisation can also wipe out a substantial portion of household budgets and savings.

Investing Regularly

Regular and consistent investing lays a strong foundation for the financial plans towards fulfilling specific financial goals. One can look at investing though Systematic Investment Plan (SIP) to inculcate a disciplined way of investing

Under a SIP, a fixed investment amount is deducted automatically at periodic intervals and is invested in a mutual fund scheme specified by the investor. Further, regular investments across market ups and downs enable the investors to steadily accumulate funds to achieve one’s financial goals. 

Staying Flexible with the Investment Plans

One should always strive to stay consistent with the financial plans and maintain flexibility towards the investment requirements. Investing should not be a burden but a pleasing experience for it to be sustained for a longer time frame. Temporarily, if the cash flow situation does not allow the investor to continue with SIP, one can pause such investments. 

Pausing and not discontinuing the investments does one good that it resets the investment journey automatically after the pause period. Whereas, in case of increased cash flows investors can opt for a top-up SIP for increased investment or making a lumpsum investment for one-time windfall receipts like an annual bonus, incentive, etc. One should be flexible to align the investment strategy with the investible surplus while also staying disciplined towards their financial goals.  

Regular Review of the Investment Portfolio

When it comes to financial planning, it is about making investments and reviewing such investments at regular intervals. Such a periodic review ensures that the underperforming assets are screened out at an early stage and replaced with better performing schemes. Further, one should ensure that such a review is done on the long-term performance of the schemes and not biased by the near-term performance. This helps the investors to keep the portfolio in good health. 

With the above five tips, the financial planning experience can be an exciting journey towards financial prosperity. If we are able to imbibe and implement the financial discipline, we will be able to effortlessly achieve our financial goals and sail through the difficult times.


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This material is part of Investor Education and awareness initiative of UTI Mutual Fund.

The information herein should not be considered as 'investment advice'. Reader is requested to make informed investment decisions and consult their Mutual fund distributor or financial advisors to determine the financial implications with respect to investing in Mutual Funds

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