The Four Pillars of Financial Planning

Financial planning consists of four basic things – insurance, taxes, retirement and estate planning. The first and the most important pillar is to have insurance against the losses that you cannot cover yourself. For this you will need to determine what the losses that you can endure are and what you need insurance against. For example, you may not need to insure a laptop since if that is lost you can afford to replace it with a new one. However, it would be wise to have insurance against emergencies like hospitalisation, fire and robberies.

Secondly, it is important to save tax efficiently. This means that one should take advantage of government schemes which allow us to invest and save tax at the same time. There are several methods where an investor can save on taxes and it is best to consult an expert so as to know all the various loopholes.

Retirement is a time when income decreases while expenses increase. In order to overcome this difficulty, it is important to start saving for retirement right from the first day at work. A slow and steady method of saving will eventually amount to a significant corpus of funds which can be utilised during old age. Thus, contribute regularly to your company’s retirement account.

And finally the last but not the least, estate planning. One should be very clear about what they want to do with their property and belongings after death. If no will has been made, the government takes over.