Financial Planning Checklist- Part I

A. Goal Setting

Step 1: Identify and write down your financial goals, whether they are saving to send your kids to college or University, buying a new car, saving for a down payment on a house, going on vacation, paying off credit card debt, or planning for you and your spouse’s retirement.

Step 2: Break each financial goal down into several short-term (less than 1 year), medium-term (1 to 3 years) and long-term (5 years or more) goals; which will make this process easier.

Step 3: Educate yourself and do your research. Read Money magazine or a book about investing, or surf the Internet's investment web sites.
Step 4: Evaluate your progress as often as needed. Review your progress monthly, quarterly, or at any other interval you feel comfortable with, but at least semi-annually, to determine if your program is working.

B. Manage Cash flows

Step 1: Pay Yourself First
By paying yourself first, you can ensure that you nearly always have a surplus to manage. Establish a fixed amount that you enter into your budget as surplus, or savings. It should be treated as a fixed, essential expenditure that cannot be changed. If, at the end of the month, your budget shows a deficit, then your first course of action is to find areas in your non-essential spending to cut.

A good option is a mutual fund sip or a recurring fixed deposit to discipline you in investment

Step 2: Balance Your Surplus
With a monthly surplus, the decision comes down to how to use it. This should depend on your budget and financial goals. If you have debt, you will want to commit a portion to accelerating your debt reduction. If you don't have a sufficient emergency fund, you will want to contribute to that so you can build up your safety net.

Step 3: Cheapen Your Debt
If your debt payments comprise a significant part of your monthly budget, you should consider finding cheaper forms of debt. If you are good standing with your credit card companies, you are will probably continue to receive offers to transfer your debt to low or zero interest cards. As long as you are not adding to your debt (and you shouldn't have to if you are managing your cash flow to a surplus each month), you can responsibly shift your debt to less expensive cards. This can effectively decrease your debt expense and add to your surplus.

C. Tax Planning

Step 1: Plan AHEAD
Most of the people plan their tax wither in the last month or when the company asks for the of the investment proof typically during the last quarter of the financial year, Planning at the start of the year helps avoid investment mistakes and is not a burden since investments can spread out during the year.

Step 2: Tax investment is like any other investment
Somehow people feel that when it’s tax investment it’s OK to invest in any product without evaluating the return’s or the benefits of the product .Treat tax investment’s like pure investments and invest thoroughly before investing


Step 3: optimize the deductions and exemptions
Know the tax rules .From the obvious ones like sec 80 C,80 D to not so obvious ones like 80 G donation 80 DD deduction for handicap dependents,

see all tax articles on tax :- click here

In the next part of “Financial Planning Checklist” we will see retirement planning, risk planning and more