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Business News/ Money / Personal Finance/  3 key approaches for establishing savvy personal financial planning
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3 key approaches for establishing savvy personal financial planning

Savvy personal financial planning is crucial in India's dynamic economy. This article explores a three-pronged approach: establishing an emergency fund, adopting innovative savings techniques, and diversifying investments.

Prudent personal financial planning is now more essential than before.Premium
Prudent personal financial planning is now more essential than before.

In the dynamic landscape of India's economy, where inflation and fluctuating market trends are becoming the norm, savvy personal financial planning has become more crucial than ever. It's not just about saving money; it's about strategic financial manoeuvring. This article explores a three-pronged approach: establishing a reliable emergency fund, adopting innovative savings techniques, and diversifying investments.

Crisis management & emergency fund

In the evolving landscape of India's economy, effective crisis management is a cornerstone of personal finance. The National Sample Survey Office (NSSO) survey highlights a concerning trend: only about 23% of urban households, and even fewer in rural areas, are prepared with an emergency fund for financial crises. This lack of preparedness is further compounded by low insurance penetration. According to the IRDAI's 2020 report, only around 35% of Indians have health insurance, leaving a significant portion of the population vulnerable to the high costs of medical emergencies.

Health insurance is not just a safety net for medical emergencies; it's a critical component of financial stability. Similarly, term insurance plays a vital role in ensuring family security during unforeseen circumstances. We believe that a robust financial plan must include both a strategic approach to emergency savings and comprehensive insurance coverage. This dual focus on savings and insurance is fundamental to building a resilient and secure financial future in today's unpredictable economic environment.

Savings and liquidity plan

India's savings landscape is evolving, introducing more innovative and flexible options than ever before. Auto-sweep accounts, which merge liquidity with higher interest gains, are a prime example. Additionally, adopting smarter spending habits, like making purchases during sales and opting for high-quality second-hand items, can enhance financial efficiency.

This evolving landscape also highlights a shift towards personalised financial instruments. Structured debt, for instance, has become a key tool for strategic liquidity management. Our platform, among others, helps investors access immediate liquidity by utilising various investment instruments built around future income streams. This approach ensures a consistent cash flow and opens avenues for reinvestment and managing financial obligations.

The Indian debt market has experienced significant growth recently. In the dynamic $2.34 trillion bonds market, innovative options are designed to adapt to diverse investment strategies and market trends.

In the realm of modern finance, the focus is shifting beyond mere wealth accumulation. It's now about creating investment strategies that align with individual goals and aspirations. Modern platforms/investment avenues are exemplifying this shift by offering innovative solutions, including products like Securitised Debt Instruments, etc. catering to the unique financial journeys of investors

Investment planning

In the dynamic realm of Indian finance, diversification across various asset classes, including equities, fixed deposits, and real estate, is becoming increasingly important for risk management and return optimization. Regular, disciplined investments, such as through Systematic Investment Plans (SIPs) in mutual funds and stocks, are gaining prominence.

The investment market has seen notable shifts, such as the decrease in fixed deposit rates from 9.5% in 2001 to about 6.5% in 2023. This change has steered investors towards alternative avenues like equities and real estate. The equity market's transformation is evident, with a 26% yearly increase in demat accounts, hitting 12.7 crore in August 2023. Concurrently, the Indian real estate market is also experiencing significant growth, reflecting the expanding range of investment options available today.

The exploration of new investment avenues is markedly transforming the accessibility and scope of financial planning. Platforms like ours are at the forefront of this change, facilitating fractional ownership in commercial real estate. This innovation opens up high-value investments, once limited to institutional investors, to a wider audience. Such options not only diversify investment portfolios but also represent a significant evolution in personal financial planning. Embracing novel and diverse investment opportunities is becoming a key strategy for comprehensive wealth accumulation.

India's investment scene is increasingly favouring diversified portfolios, encompassing equities, private equity, ETFs, REITs, and real estate. This shift, coupled with changing views on traditional investments like fixed deposits, highlights the dynamic financial environment. Adapting investment strategies to include various asset classes and aligning them with individual goals is essential in today's evolving market.

Recapitulating 3 pronged approaches discussed: build a reliable emergency fund and prioritise insurance; adopt innovative savings and liquidity strategies tailored to personal goals; and pursue diversified investments, including novel options like fractional ownership of commercial real estate.

Remember, starting your investment journey is crucial, no matter the amount. Consistency, regular portfolio reviews, and diversification are fundamentals. It's never too late to begin – the right time is now. These principles form the bedrock of a secure financial future.

Disclaimer: Please note that every investment avenue is subject to risks. The opinions expressed in this article are personal and should not be considered as professional financial advice. Thorough research and consultation with a professional advisor are strongly recommended before making any investment decisions.

Aryaman Vir, CEO of WiseX

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Published: 14 Dec 2023, 09:12 AM IST
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