Make Your Own Financial Plan


Ideally Financial Planning  should be done by an experienced financial planner.However, with some expert guidance, an investor could also put in place a good financial for himself/herself. Here is a brief explanation on how you can do it yourself.


Prepare family’s monthly and annual budget. Involve your family members and be conservative.

Try to save more. Think twice before making non-budgeted impulsive purchases.

Put aside equivalent amount of household expenses for 3-6 months in liquid/ultra short term debt funds. This should be dependent upon your estimate of for how long, in case of an emergency your income stream could get disrupted, if at all.

Protect the family from the risk of family bread earner(s) not being around through a pure term policy with an adequate sum assured, which is enough to sustain the family’s current life style, when invested. Cover the entire family with a health insurance plan.

Insure the house and precious articles in it.

Ensure your first lot of investments in small savings instruments like PPF .They provide secured, tax efficient returns.


Ascertain the future financial needs and goals of the family , which could include kids’ higher education, expenses for their weddings, major family holidays, buying a house, a retirement corpus for you and your spouse etc. Ascertain how much you would need currently , likely time horizon to reach each of your goals and factor in the impact of inflation to arrive at a future value for each of the goals. These are the future financial needs for you and your family .

Rank financial goals in terms of priority.Understand characteristics of each asset class in terms of returns expectations, risk that they carry and ideal time horizon.

Equities are for long term wealth creation net of inflation and tax. Debt funds and other fixed return instruments are for medium to long term.

Short term debt funds are for short to medium term capital preservation and/or regular income generation.

Liquid funds or ultra short term debt funds are for anytime liquidity with capital preservation.

Allocate portions of your savings to fulfill each of your financial goals after considering the expected compounded annual growth rate from each asset class, over the foreseeable time horizon.

Invest lump sum, when possible.

Alternately use the SIP route for making regular investments. Similarly, use SWP to meet your future monthly/periodic needs.

Within each asset class, carefully select the investment instrument viz. funds, stocks, bonds, etc.

Inspite of prioritizing, if you think you are unable to meet your key goals, you may need to scale down your goal size or increase savings.

It is advisable to have all investments in joint names or nominees earmarked. Making a Will or any other form of succession planning is strongly advisable.

Review the progress of your plane at least once a year.

Make suitable course correction, if required, after such reviews.

Although you can do any or all of the above yourself, consulting a qualified and experienced financial advisor could be useful.

Came across this article by Naresh Pachisia / UTI MF.


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