Financial Planning For Career Beginner Is Imperative

Our apprehension of personal finance began with our piggy banks. Whenever our close relatives gave us money, we gingerly put it in the piggy banks with the wish to buy something later. The concept of budgeting seeped in when we had to wisely spend our pocket money trying not to exhaust it before one month. We all feel excited to start our careers. It feels great to become financially independent. Financial Planning for career beginner is important because it allows one to adopt the personal financial planning practices right through and become better financial decision makers in life.

Financial planning is for all

In the beginning, we may feel that we don’t need any Financial Plan for what we are earning and spending now– things are manageable. But, financial planning is a way of life. Financial Planning for career beginner can help him/her achieve the life goals in a systematic and planned way by avoiding anxiety or surprises from the start itself.

As a career beginner, initially you may find steady monthly cash inflow, although it may not be lucrative. You may be unmarried but you may have potential dependents like parents, you may have to pay EMI for your education loan, you may be paying rent if you’re staying away from home for your job etc. On the other hand, you may be fortunate for not having other major family commitments.

Quite natural, you may have a long wish list like owning latest gadgets, buying a car, owning a residential property, foreign tours, own marriage cost etc. You may decide to borrow money (take loan) without being able to differentiate between needs and wants as per present personal financial situation of yours. Just because your office colleague or your friend or your neighbor owns a car or a flat that doesn’t mean you’ll push yourself beyond your financial capabilities to buy one. Again, you may have a big friend circle for which you spend huge money at weekends. At times, you may lend money to your friends too.

Considering the above situations, identify your own position. It’s not the right approach to think that because you are a career beginner, you don’t need your Financial Plan. It is wise to do financial planning in initial stage and start making future provisions. Usually, everything whirls around today or tomorrow; the feeling of tomorrow being quite far away is a wrong concept. If your today is good then your past and future will shine.

Aspects covered while we do financial planning for career beginner

A Financial Plan helps you to define a timeline to follow your goals. Through financial planning, you can channelize your surplus money for your different goals. It helps you to stay the course. A significant aspect of your Financial Plan is your budget. Budget helps you to keep yourself on the right track.

Have control on yourself when it comes to money: At the starting phase of your career, try to save 40% of your monthly income & you can spend balance 60%. This is a rule of thumb. Rule of thumb may not be suitable because your personal matters are unique. Financial planning processes guide you to follow your budget uniquely. If you’re spendthrift and you’re living paycheck to paycheck, ultimately, you’ll be bogged down due to money crunch even before the month ends. As a career beginner, Financial Plan helps you to follow your family budget. You’ll maintain your cash flow too so as to see whether you’re exceeding your family budget or not.

Maintain a net worth statement: In a Financial Plan you get to see your own net worth statement, i.e. what is owned by you minus what you owe. Additionally, you can identify the value of your investment assets and personal assets. Please note that personal assets are your status symbols and for personal use. Whereas, your investment assets generate income as well as you can get compound effects (growth).

Prudent use of surplus: Buying a car, owning a flat, foreign trips, creating fund for marriage etc. can be your goals. Through financial planning you can visualize your aspirations or goals. To achieve your goals, you need money and you can invest according to your objective, risk profile, time horizon of investments, personal and macroeconomic factors. Through proper asset allocation and investment strategy, you can invest your surplus money judiciously to achieve your goals at different time horizons. Therefore, you’ll have your unique investment portfolio.

Debt Planning: Without proper debt planning you may take personal loans with higher rate of interests. If you fail to do debt planning, you may fall in debt trap. Sometime it turns into a vicious circle. Your huge EMI can eat up your entire savings and partial income too. It’s not easy to get rid of vicious circle. If possible, first you save and then buy.

Risk analysis & Insurance Planning: In a Financial Plan, you get details of insurance planning (both life and non-life). In case of life insurance, it’s always better to have Term Life Insurance instead of buying Traditional Insurance Plans.

Contingency Planning: Being a career beginner, you must have a Contingency Plan. But why is it necessary? God forbid, due accident or illness, if you become temporarily disabled, you may be bed-ridden for months. You may lose your income. Even due to temporary unemployment, you need to keep 6 to 12 months of expenses as Contingency Fund.

Retirement Plan: Due to unavailability of Social Security system, you must start from your early stage. In a Financial Plan you get retirement planning steps. You have to understand the inflated value of expenses. If you survive for 20 to 25 years or more after retirement, how much corpus do you need? This is where the role of a Certified Financial Planner becomes crucial.

Post marriage planning: You have to alter your Financial Plan after your marriage. Post marriage money management can be tricky. Your spouse may be working or non-working. A Financial Plan will address each area. It’s obvious that you have to revisit your Financial Plan with your Financial Planner for necessary additions and alterations. Reconsider your goals with your spouse for additions and alterations, change your budget and incorporate the necessary changes. If your spouse is working also, add his/her income and expenses for each month. Sooner is the better if you form good money management habits as a newly married couple. Make a list of both of your bank accounts, details of insurance, investment, existing loans and credit cards. You need to revisit and change your Emergency Fund/Contingency Fund. Recheck both of your investment risk profile and plan your asset allocation strategy with your Financial Planner.

Even, after you further extend your family, you go for fresh risk analysis and insurance planning although you did it immediately after your marriage. You have to make provision for spouse and children. In a nutshell, you will have to go for detailed financial planning processes.

Income Tax Planning: Tax planning is be done to avail maximum benefits of tax deductions, exemptions, rebates, allowances and concessions that are permissible under the Income Tax Act. The motive is to reduce the tax burden without breaking the law.

Estate Planning: In simple language, Estate Planning refers to making a plan in advance and naming who will receive (as per your choice) what (the things you own) after you die.

Financial Plan for career beginner sets the right mindset towards financial well-being.

To conclude, while we do financial planning for career beginner, we take due care in making them understand the basic concepts of personal finance to enable them to make mindful financial choices in life.

The basics of financial planning for career beginners are as follows:

• Making provision for self-up gradation.
• Following your own budget and maintaining cash flow to track surplus available for investment.
• Slowly building funds by investing the surplus for big purchases and avoid taking unnecessary loans.
• Maintenance of current quality of life/ standard of living and continuing it in future by starting to make provision for post retirement. Retirement is like a long vacation. Passive income supports during retirement will enable you to enjoy comfortable retirement.
• Building up funds for emergencies/contingency like accident, total or partial permanent disablement or total or temporary disablement due to accident or illness etc.
• Taking adequate insurance plans that should include death benefits, health insurance and accident risk protection including support to cover disabilities and loss of income due to illness or accidents.

Following the basic guidelines of a professionally competent Financial Advisor in Kolkata related to your personal finance may help you to overcome unnecessary stress in life.