Key Rules of Financial Planning for FY 2024-25

Financial Planning Rules for FY 2024-25: A Path to Financial Freedom

Investors who have been actively participating in the market were delighted as the 2023-24 fiscal year came to a close. Various asset categories such as stocks, mutual funds, and precious metals delivered significant returns. The Indian stock market continues to reach new heights as investments pour in from retail investors, institutions, and High Net Worth individuals (HNIs) into both stocks and mutual funds.

However, amidst the excitement of the new financial year 2024-25, it is essential for investors to prioritize financial planning over chasing returns. To help investors refine their path to financial freedom, here are 13 key rules of financial planning for FY 2024-25:

1. Analyse Your Financial Situation:
Assess your current and anticipated future income alongside the funds needed to achieve various objectives. Calculate the amount required to reach your financial goals and determine the gap between your current financial status and desired one.

2. Track Your Expenses and Create a Budget:
Monitor your expenditures to understand where your money is going. Use budgeting tools to track every expense and identify areas for improvement. Cut down on unnecessary expenses while maintaining quality of life.

3. Set S.M.A.R.T. Financial Goals:
Establish specific, measurable, achievable, realistic, and time-bound financial goals. Ensure your goals align with your current financial status and resources.

4. Understand the Risk and Reward:
Recognize the relationship between risk and reward in investments. Diversify your portfolio to manage risk effectively.

5. Do Not Ignore Inflation:
Consider the impact of inflation on your investments and incorporate inflation-adjusted calculations into your financial planning.

6. Don’t Time the Market:
Avoid trying to predict market movements and focus on a long-term investment strategy instead.

7. Implement Systematic Investment:
Adopt a systematic investment approach like SIP to benefit from rupee cost averaging and minimize the impact of market volatility.

8. Buy Adequate Insurance Coverage:
Ensure you have sufficient insurance coverage to mitigate risks associated with life and health emergencies.

9. Plan Your Debt Effectively:
Manage debt strategically to avoid financial strain and prioritize high-interest debt repayment.

10. Build a Contingency Fund:
Maintain an emergency fund equivalent to at least 6 to 24 months of living expenses to cover unexpected costs.

11. Enhance Tax Effectiveness:
Optimize tax efficiency by leveraging deductions available under the Income Tax Act.

12. Don’t Chase the Returns:
Focus on long-term financial goals and avoid chasing high returns without considering associated risks.

13. Review Your Portfolio Periodically:
Regularly review your investment portfolio to ensure it aligns with your financial goals and risk tolerance.

By following these 13 key rules of financial planning for FY 2024-25, investors can navigate the financial landscape with confidence and resilience, ultimately working towards achieving their financial goals and securing their future. Remember, financial planning is an ongoing process that requires periodic review and adjustment to adapt to changing circumstances.