Financial planning is necessary for a comfortable. The way you manage your funds in present can help you preview your future. However, majority of people do not take financial planning seriously. And when you realize the importance of it, you have already wasted a lot of time.

Here are a few tips that can help you plan your financials efficiently to meet your short and long term goals easily.

#1 Start Early

Even if you have a small amount to invest, start investing. The earlier you start investing, the more returns you are likely to earn.

Let us understand with an example.

If you start investing Rs 5000 per month at the age of 30, then you can build a retirement corpus of Rs 1.75 Cr at the age of 60 years considering the rate of returns at 12%.

However, if you start investing the same amount at the age of 30 to accumulate Rs 1.75 Cr, then you will have to invest Rs 9,314.22 per month.

Now, when you start investing at an early age of 25, you can achieve the goal of 1.75 Cr by investing just Rs 2,721.21 per month at the same rate of interest.

Hence, the earlier, the merrier.

#2 Take Calculated Risks

When you start investing early, you have a larger risk appetite. You can diversify your portfolio by investing more in equities and the rest in debt funds. As you approach your financial goal or retirement, you can reverse the fund allocation to reduce volatility.

#3 Factor Inflation

If you think investing in fixed return instruments like fixed deposit is a good to earn guaranteed returns then think again. For instance, if you are earning 6.5% interest on your fixed deposits and the rate of inflation is at 7% then technically your not earning anything on your money. In fact, the value of your money is degrading by .5% per year.

Hence, it is essential to invest in a financial instrument that can beat inflation. Diversify your investments with bonds, mutual funds, and equities that can help you earn more than the rate of inflation.

#4 Tax Savings

Create an investment portfolio that offers a few tax savings components. You can consider investing in ELSS, PPF, SSY, NPS, FD, ULIP, and more to save up to 2 lakh on taxes per year.

#5 Insurance

Consider buying a term plan that is 40 to 50 times of your current annual income. This will keep your family financially independent in case of any mishappening. Also, cover yourself and your family with adequate health insurance to prevent your savings from burning out on hospital bills.

The earlier you will buy insurance plans, the cheaper your premium will be.

Hope above mentioned points will help you plan your finances more efficiently.