Financial Planning for Salaried Employee

A salaried employee gets a fixed and regular income/compensation for the services he/she renders to an employer/organization. Financial planning for salaried employee is critical because the future and present requirements of the family are to be met from the pre-defined and fixed income source. Major part of the income meets the present family requirements (expenditure) while another part is set to be invested to meet future requirements (financial goals). Financial planning for salaried employee is to be prudently executed and monitored to inculcate the disciplined approach in managing family finances.

Financial Plan is based on subjective quantitative and qualitative data of an individual. As a SEBI Registered Investment Advisor in Kolkata, we address the following core areas:

1. Analysis of current financial status of the family
2. Risk Profiling & interpretation
3. Risk Management processes
4. Developing Personal Financial Statement
5. Budgeting
6. Cash Flow Management and Credit Management
7. Goal-based Investment Advice
8. Taxes & their implications on Personal Financial Plan &
9. Estate Planning etc.

During financial planning, the financial statements are essential relative to client’s goals and objectives as the financial ratios derived from the statements would allow the Financial Planner to analyze the current circumstances, identify strengths and weakness and assess if the goals are realistic. Thereafter, development of suitable strategies for the individual/ family can be done. We believe that personal aspects of the individual/ family are to be assessed with great care during financial planning. This helps us to design suitable financial strategies and the individual/ family client feels comfortable in implementing the action plans as laid down in the Financial Plan.

Financial Plan is indispensable for each category like salaried, professional, businessman, etc. In practice, financial planning for salaried employee is strikingly different from that of other categories.

Financial planning for salaried employee becomes constructive only when financial situation is evaluated and personal financial planning processes are prudently implemented towards financial well-being. Evaluation of financial situation includes:

• Salary & bonus component,
• Expenditure pattern, 
• Other fixed and variable commitments,
• To what extent the salaried employee’s Contingency Fund is to be created,
• Insurance needs (life & non-life), 
• Existing assets (personal & investment) and liabilities (loans),
• Basic financial goals like child’s provision, retirement provision, provision for car purchase and vacations, etc.
• High-end financial goals like owning holiday home, starting new venture after retirement, etc.

The role of a qualified Financial Planner, who is a Certified Financial Planner and/or SEBI Registered Investment Advisor, is of a coach. The Financial Planner takes you through time-tested financial planning processes to enable you to realistically visualize your financial goals and prepare viable financial strategies towards fulfilling them.

Financial planning for salaried employee is essential to lead a financially disciplined life and rationally achieve financial goals

As Certified Financial Planner in Kolkata, we focus on analyzing the present financial situation of the salaried employee, his/her family requirements (current & future) and the existing process of managing family finances. It deserves special mention that discussion related to various personal aspects helps us to deepen the relationship with the client and write the Financial Plan for them effectively. Thereafter, we design action plans starting from risk management, investments and other miscellaneous financial aspects which are unique to the family/individual. We also focus in streamlining the process of managing family finances slowly by considering the comfort level of the individual/ family. 

We work on family cash flow planning to implement the action plans as laid down in the Financial Plan of the family. Generating surplus from the fixed income source and investing the same as per prioritized objectives, risk profile of the investor, time horizon of investment, personal and macroeconomic factors require detailed analysis and disciplined approach. Bonus component within the salary income varies based on own performance and other external factors. Even y-o-y income growth is mostly not fixed. Home loan EMI and/or Car Loan EMI eats up your savings. As per cash flow situation, pre-closure of loans is to be considered. Family expenditure is to be tracked and compared with budget. Assumptions based on such aspects are critical. Financial Plan developed by considering these assumptions is to be monitored and reviewed at pre-defined intervals. Corrective actions are taken with respect to existing insurance policies or investments which turn out to be unsuitable for the individual/family after due analysis. Taxes, inflation and standard of living influence the technical aspects of the Financial Plan.

Contingency planning is a decisive factor. You would need contingency funds in case of emergencies like job loss/ job switch, medical issues or monetary help to relatives.

Unexpected situations like any nation-wide economic crisis and/or pandemic may unsettle your journey towards financial well-being. Adequate provisions (as far as practicable) must be made to combat such situations and reduce financial stress.

One alarming factor for any salaried employee is that salary income will not be credited to the Bank A/c after retirement. The employment benefits acts as the white knight for salaried class to build “Retirement Corpus”.  We, as Financial Advisor in Kolkata, strive to recognize and understand the complex emotions and anxiety often felt by individuals approaching retirement. Even, thoughts to pre-pone retirement decisions come from too much stress and anxiety. If you feel unappreciated or marginalized by superiors and/or co-workers, you may decide to retire before the customary retirement age. If these emotions are serious enough, there may be a significant shift in the salaried employee’s attitude toward continuing to work. From a psychological perspective, retirement may lead to identity crisis. For individuals who have worked their whole lives, their sense of self or value may be tied to their jobs or their businesses. On this note, have you painted the pictures of your retirement days in your mind? A new phase of life begins. It is understood that you will certainly not want to compromise on your standard of living after retirement. Therefore, in order to lead a comfortable life even after retiring from work-life, you need to start building your corpus for retirement. But, do you know how much fund you need to accumulate for your “Comfortable Retirement”? Without knowing how much one would need during retirement, he/she cannot start working towards the goal.

To conclude, financial planning is the only way that can help you to manage your limited income flow in a prudent manner. Therefore, if you’re busy and/or not confident about this subject, look for a qualified Financial Advisor and hire him/her to help you in planning your finances.