Planning helps to prepare for the future and make necessary contributions. Although several investors are well-versed with the importance of planning, not all are well-informed about the procedure to achieve your goals.

This article is a comprehensive guide to create a sound financial plan for your goals:

  1. Assess your current financial situation
    Start by evaluating your current financial condition. You can start by listing all your existing assets and its monetary value and your liabilities or any amount of sum you might be owing to someone. This is the most crucial step to create a financial plan, and if you already have a budget in place, then it would be a cakewalk to get it all on paper. Jot down your expenses, income, current savings and existing investments.
  2. Chalk down your goals
    The next step is listing down all your financial goals and assigning them a timeline by which you wish to achieve it. Once you have the prepared the list, you can bucket them down under different heads such as short-term, medium-term and long-term goals. For instance, buying the latest mobile phone in the next 2-3 months is a short-term goal, preparing for a vacation in 2-3 years can be termed as medium-term goal and saving for your child’s higher education or their marriage, or even your retirement can be termed as a long-term goal.
  3. Create an action plan
    You need to understand your risk appetite, which is the amount of risk you are willing to take and can afford to take when it comes to investing. For instance, if you are comfortable with 10-20% erosion in the value of your portfolio in pursuit to earn significant returns, you are a risk-taker. However, if you experience sleepless nights as soon as your portfolio takes a small dip, you could be considered as a risk-averse investor.
  4. Evaluate various investment options
    With different types of investment offered to an investor, choose the one that best aligns with your portfolio. A right set of securities is the one whose objectives are in line with the objectives of your goals. For instance, if you have a decent risk appetite and looking to invest in mutual funds for a long term, you might consider investing in equity funds. On the other hand, if you are a risk-averse investor and want to park your cash for a shorter duration, you might consider debt mutual funds.
  5. Implement your financial plan
    The next step is the actual implementation of all the planning. You have completed almost 90% of the process of financial planning. You can also consider starting an SIP (systematic investment plan) to make saving and investing a habit. SIP realizes the importance of investing and ensures that a fixed amount is regularly invested in your desired mutual fund schemes.
  6. Review and revise
    Financial planning is not a one-time exercise. It’s to evaluate the progress made by your mutual fund investments at least once a year to achieve your financial goals. This approach will help you comprehend how your investments are faring and also help you make necessary changes if required.

Most of the time, we lose tracks of your aspirations and dreams. A financial plan provides a roadmap to achieve our goals. Never stop dreaming and investing. Happy investing!