RESUME APPLICATION PAY PREMIUM
Fund Performance

Fund Performance

Knowledge Center

Knowledge Center

About Us

About Us

Tools and Calculators

Tools & Calculators

Quick links

Mobile (Download app)
  • Webpages
  • Documents
  • HDFC Life ClassicAssure PlusInvestment
  • HDFC Life ClassicAssure PlusInvestment
  • HDFC Life ClassicAssure PlusInvestment

For NRI Customers

(To Buy a Policy)

(If you're our existing customer)

For Online Policy Purchase

(New and Ongoing Applications)

Branch Locator

For Existing Customers

(Issued Policy)

Fund Performance Check

RESUME APPLICATION PAY PREMIUM

What do you want to do?

Quick links

Mobile (Download app)

Download HDFC Life App

Buy plans, track your policy, make renewal payments & monitor fund performance with HDFC Life App, Download Now!

Apple Logo Go to Google Play Store

Personal Finance Planning

A systematic approach to savings is essential to acquire financial stability. Building wealth over time with the resources available cannot happen by just putting aside a part of your income in a savings plan. A proper investment strategy to convert the savings into wealth is necessary. Personal financial planning is all about the steps that steer you towards financial security. Read on to understand how to manage your personal finance to fulfil all your financial goals and be prepared for unforeseen expenses.

Check Returns TALK TO OUR ADVISOR
Features and Benefits of HDFC Life Sanchay Par Advantage

GET A FREE QUOTE

We respect our customers' privacy and do not spam them.

I authorize HDFC Life and its representatives to contact me through Call, Email, SMS or WhatsApp. This consent overrides my registration under DNC / NDNC (this would mean we would contact you even if you are registered on any Do Not Disturb list).
Personal Finance Planning

What is Personal Finance?

Personal Finance Planning
December 12, 2024

Table of Content

 

Financial management, i.e., balancing your expenses with your income and creating a resource to invest for the future, is the personal finance meaning. It begins with setting financial goals, tracking expenses and prioritising needs over wants, creating emergency funds for unforeseen expenses, investing for the future, and reviewing and adjusting your investment to align with changing goals and market trends. In brief, personal finance is a strategic way to secure your financial future.

Personal Finance – Definition

Prudent management of your income, savings, and investments to fulfil the financial objectives set for different life stages defines what is personal finance. Creating a budget, investing the savings to align with your goals and risk tolerance, retirement planning, etc., are all an integral part of personal finance planning. The two components of personal finance are savings out of your income and investing it in assets for high returns to build wealth over time.

Understanding the Importance of Personal Finance

Just knowing what is personal finance does not in any way lead to financial freedom. You should also understand the importance of personal finance and integrate it into your life. It is beyond monitoring your expenses and striking out the unnecessary ones to create resources for saving. It is a pathway to financial security. Managing your finances and making smart investment choices to progress towards a stable and financially independent life is the outcome of personal financial planning.

Key Elements of Personal Finance

Once the personal finance meaning is understood you should also know the elements of personal finance for efficient planning. The key elements are:

  • Income

    • Income is what sets your personal finance journey rolling. The moment you have a steady income, personal finance planning comes into the picture. Income source can be any activity that generates income, such as business, freelancing, or engaging in financial services like investments and insurance etc., besides salary.

  • Expenses

    • The next most important aspect of personal finance after income is expenses. Income and expenses go hand in hand. Whenever you seek financial advice from professionals, they never suggest allocating all the funds to savings. Their advice will be to spend just enough to not even reach your financial goals.

  • Investments

    • Investment is a vital element of smart personal finance. Parking your funds in a high-yield savings plan, purchasing an insurance plan, and allocating funds to equity, mutual funds, etc., are all investments. If wealth creation is your goal, you should invest in assets that align with your goals, risk tolerance, and affordability. Apart from growth, asset protection is vital to safeguard your investments against market risks. For this, you need to have an in-depth knowledge of market trends and require thorough research before putting your savings into any asset.

  • Financial Safety

    • Money that does not provide financial safety is of no use. Life is uncertain, and eventualities cannot be predicted. Being prepared to face any eventuality is the crux of personal finance. Your investment plan should necessarily include insurance, which provides death benefits for the family’s financial security and maturity benefits to meet your financial goals.

Tips for Managing Your Personal Finances

Financial literacy navigates personal finance in the right direction. Not all of us can make smart decisions about savings and investment. Here are some tips for personal finance that boost your financial discipline.

  • Create a Budget

    • Setting financial goals initiates personal finance exercise. The next move is to create resources to invest and earn returns to fulfil the goals. Financial strategies like creating a budget will help you manage your income and save for long-term financial goals.

    A meticulously drawn budget will prevent stretching beyond your income. Instead, it helps you track your expenses and eliminate the unnecessary ones to save extra for fulfilling all the listed goals.

    The rule for a perfect budget is to allocate 40% of the net earnings for mandatory expenses like grocery, utility bills, and school fees, etc., 30% for entertainment and shopping, and 30% to save for the future, including building retirement funds and creating a diverse investment portfolio.

  • Save First, Spend Later

    • Save first and spend later is the mantra to create an emergency fund, especially if you have just begun your career. The kitty should have enough to manage 3 to 6 months of living expenses and even up to 12 months if you can afford to save more. The fund should be accessible in case of need, and so it has to be parked in high-yield accounts like fixed deposits, short-term mutual funds, etc.

  • Control Your Spending

    • The rule of personal finance is not to be extravagant. Delay the not-so-needed expenses and keep a check on your spending. Overrunning your budget will affect your financial health as you may end up borrowing funds to meet your immediate goals. Make a list of all the mandatory expenses that arise in a year and allocate funds to meet them in advance.

  • Make Sure You Have Enough Insurance

    • Insurance is a lifeline during adverse situations. With adequate life cover, your family will continue to have financial independence even in your absence. The overall requirements of your family should be the yardstick to determine the sum assured. Otherwise, with insufficient funds, they may land in a financial crisis. Besides life insurance, you should also have sufficient health insurance to provide for medical expenses.

    It is recommended that you purchase insurance with a life cover equivalent to 10 times your annual salary and health insurance with coverage equal to your annual salary. Additionally, investing in a retirement plan like ULIP will ensure a comfortable life during your golden years. Since individuals of all age groups need insurance products, investing in them early in life makes them more affordable.

How to Minimize Taxes with Personal Finance

Tax planning entails investing in tax-efficient investment products. However, there are tax-efficient loan products that can also be considered to minimise tax liability. If you strive hard and maintain a good credit score you can avail of a home loan at a nominal interest to fulfil one of your long-term goals, i.e., owning a dream home. Given below are some tips to minimise tax.

It is essential to note that the total deduction available under section 80C considering all the above investments allowed under this section should not exceed Rs.1,50,000 per year. Individuals and HUFs are both eligible for Section 80C deductions.

Summary

Personal finance is challenging but not an impossible task. Anyone who understands the importance of personal finance will start the journey at the earliest. Keeping it as simple as possible is imperative for better results. But fund management cannot be done haphazardly. Financial planning is a systematic approach involving setting financial goals, creating a budget, building an emergency fund, and periodical review and adjustment of the investment portfolio. The sooner, the better. The rule is to head towards wealth creation, so start investment planning immediately after you get a job.

FAQs on Personal Finance

Q. What is personal financing planning?

Personal financing planning is managing your income efficiently to create resources to invest for the future. It involves assessing your current financial health, identifying your goals, and creating an investment plan to meet them.

Q. What are the steps in personal finance planning?

The steps in personal finance planning are setting financial goals, gathering financial information, analysing the current financial situation, creating emergency funds, investing for the future, and monitoring and adjusting the investment portfolio.

Q. What are the basic components of personal finance?

The basic components of personal finance are income, expenses, savings, investment, and financial security.

Q. What is the 50-30-20 rule?

The 50 30 20 rule is 50% of your income should go towards needs like grocery, utility bills, health care, and insurance, 30% should go towards wants like entertainment and shopping, and 20% should go towards saving and investment like creating an emergency fund, planning for retirement, etc. 

Q. How do you save money from your salary?

Creating a budget gives a head start to saving money from your salary. Track your expenses and eliminate the ones that are not necessary. Save with a purpose. If need be, automate the savings. Invest any extra income, like bonuses, incentives, etc., in various assets to align with your risk tolerance and goals.

Related Articles

References:

1. https://cleartax.in/s/personal-finance

2.https://www.forbes.com/sites/truetamplin/2024/11/04/5-tips-for-managing-your-personal-finance-in-the-next-four-years/

 

Talk to an Advisor right away

Not sure which insurance to buy?

Talk to an
Advisor right away

Talk to an Advisor right away

We help you to choose best insurance plan based on your needs

Francis Rodrigues Francis Rodrigues

Francis Rodrigues has a decade long experience in the insurance sector, and as SVP, E-Commerce and Digital Marketing, HDFC Life, manages the online sales channel, as well as digital and performance marketing. He has had hands-on experience in setting up sales channels and functional teams from scratch over a career spanning 2 decades.

LinkedIn profile
Author Profile Written By:
Vishal Subharwal Vishal Subharwal

Vishal Subharwal heads the Strategy, Marketing, E-Commerce, Digital Business & Sustainability initiatives at HDFC Life. He is responsible for crafting and ensuring successful implementation of the overall organisation strategy.

LinkedIn profile
Reviewed By Reviewed By:

Here's all you should know about life insurance.

We help you to make informed insurance decisions for a lifetime.

 

What is Financial Planning?

What is Financial Planning?

Factors affecting financial planning include income, expenses, inflation, and life events. Learn how these factors influence your financial strategies and decisions.

Short Term Financial Goals

What is Personal Finance?

Types of Financial Planning

Types of financial planning include personal, retirement, and tax planning. Understand how each type helps you manage money and achieve your financial goals.

Types of Financial Planning
HDFC life
HDFC life

HDFC Life

Reviewed by Life Insurance Experts

HDFC LIFE IS A TRUSTED LIFE INSURANCE PARTNER

We at HDFC Life are committed to offer innovative products and services that enable individuals live a ‘Life of Pride’. For over two decades we have been providing life insurance plans - protection, pension, savings, investment, annuity and health.

Popular Search

Popular Searches

Disclaimer

Note: Tax benefits & exemptions are subject to conditions of the Income Tax Act, 1961 and its provisions. Tax Laws are subject to change from time to time. Customer is requested to seek tax advice from his Chartered Accountant or personal tax advisor with respect to his personal tax liabilities under the Income-tax law.

This material has been prepared for information purposes only, should not be relied on for any financial advice. You should consult your own financial consultant for any financial queries.

 

ARN - ED/12/24/19051

down-arrow