World Financial Planning Day 2023: 5 Ways To Settle Your Money Matter

October 4 marks World Financial Planning Day, an initiative by the International Organization of Securities Commissions (IOSCO). The first Wednesday of October is celebrated as World Financial Planning Day every year globally to promote investor education and protection.  

Financial planning is important as it allows one to strategically manage and leverage assets, while minimising liabilities, thus paving the way for a more stable and prosperous financial future.

This World Financial Planning Day, here is a five-step guide to help you take charge of your personal finances and pave the way for wealth creation.  

1] Family Budgeting: If you still don’t have a budget, it’s time you create one.  

In the family budget, keep provisions for monthly expenses, such as household, lifestyle, dependants, equated monthly instalments (EMI) of loans, insurance premiums, and savings and investment under different heads.  

You will need to prudently manage the cash flow in your family budget in the working phase of your life. As you reach your old age or approach your retirement stage, you will have only your accumulated funds saved in your working years to take care of all your expenses in old age.  

Do note that you will have both fixed and variable expenses in your cash flow. Variable expenses may not be discretionary (optional expenses) in all heads, i.e., household, lifestyle and dependants. You can cut down on discretionary expenses (optional expenses) wherever you can identify any.

Says Arijit Sen, a registered investment advisor with the Securities and Exchange Board of India (Sebi) and co-founder of Merry Mind, a financial advisory firm based in Kolkata: “I believe that maintaining a family budget can influence spending habits. It encourages you to set financial goals and allows you to assess your actual spending patterns. Consequences are that you can take necessary actions before things get out of hand in your journey towards financial freedom.”  

Also Read: If Your Home Loan EMIs Rise, Here's How To Renegotiate

2] Share Personal Financial Matters With Family Members: Family members experience intolerable pain during contingencies should the breadwinner be casual with money matters. Quite often, the breadwinner does not share personal financial matters with family members. Common excuses are, ‘my spouse isn’t interested in taking control of investments, insurance, etc.,’ or ‘if my spouse is looking after investments and insurance, I do not need to interfere’.  

As a result, in emergency situations, the other family members get frazzled.  

Discussing personal financial matters with family is not having control and neither has it anything to do with interference. It’s all about awareness.  

Adds Sen: “Share your personal financial matters with your spouse. If you’re unmarried or divorced, then, share with your family members or your major child. You will find relief once you share the entire financial information with your family members. In case of an unfortunate event, family members can play a significant role in managing your financial assets. He/she can prudently manage your incomplete responsibilities, such as children’s education, looking after your elderly parents’ expenses, repayment of outstanding loan, and so on.”  

3] Debt Management: One can create a roadmap towards financial stability by understanding and organising existing debts. This involves assessing the types of debts, prioritising high-interest obligations, and developing a repayment plan.  

Successful debt management not only reduces financial stress, but also frees up resources for saving and investing, thereby contributing significantly to overall wealth building. It’s a key component in achieving a balanced and secure financial future, thus allowing individuals to regain control over their money matters and work towards long-term financial goals.

Says Dilshad Billimoria, certified financial planner and managing director, and principal officer of Dilzer Consultants, a financial planning firm: “If you have an outstanding loan where the equated monthly instalment (EMI) exceeds 35 per cent of your income, you should consider preparing the same using your bonus money or employee stock ownership plan (ESOP) money. An increment of five per cent in SIPs every year can help close a 15-year home loan in 12 years.”  

4] Health Insurance: Health insurance acts as a protective shield against unforeseen medical expenses that can otherwise wreak havoc on one’s finances.  

By investing in a comprehensive health insurance policy, one can create a financial safety net that not only covers medical bills, but also safeguards their savings and investments. This proactive approach to health-related financial planning will ensure that a sudden illness or injury doesn’t lead to a financial crisis. Health insurance not only promotes peace of mind, but also aligns with the broader goal of securing one’s financial well-being, thus making it an indispensable aspect of any robust financial plan.

Adds Billimoria: “It’s important to have health insurance independent of company health coverage benefits to ensure that one is not dependent on company covers, which are restrictive and sometimes have group coverage where the coverage benefits or payouts are restricted. A pure term plan serves best to cover life insurance risks, while the needs-based method works best to identify the amount of insurance cover that one needs.”

5] Consolidate Your Bank Accounts: Consolidating bank accounts is a practical step towards optimising resources, minimising fees, and ensuring that every rupee aligns with one’s overall financial goals. It’s a simple yet impactful strategy that contributes to a more secure and well-managed financial future.

By bringing multiple accounts under one umbrella, one can get a clear picture of one’s financial situation, thereby simplifying budgeting and tracking of expenses. It not only reduces the administrative burden, but also enhances financial visibility and allows for better decision-making. Additionally, it promotes efficiency in managing bills, loans, and investments, and fosters a more organised financial structure.