We live in complex times where satisfying the needs of your family can be a difficult task. Your teenage daughter wants a new shiny iPhone, while your oldest child may want to study abroad. If you want to fulfil all their dreams and aspirations, you need to start planning your finances at an early stage. It will not only help you understand the needs of your family members but also enable you to give them what they want. But for that to happen, you need to understand the basics of financial planning.
Financial planning is an important step in meeting your life’s goals. A financial plan acts as a guide that helps you get by life comfortably. With the help of financial planning, you will be able to gain better control over your expenses, income, and investments, such as best ULIP plans, term insurance, etc., to manage your money more efficiently.
Simply put, it is better to invest your savings in an investment instrument if you want to get some serious returns. For example, your money invested in a ULIP plan will yield you much better rewards than parking it in a savings account. When you identify your family’s needs and the timeline by which you want to achieve them, financial planning will be the key to reaching those milestones and giving your loved ones what they want, when they want it.
Having said that, let us discuss the importance of financial planning and how you can secure your future with it.
Importance of Financial Planning
As an investor, you may feel confused about the instruments that should be added to your financial plan. It can be hard to choose between the best ULIP plan and a mutual fund. But don’t worry, here are some useful financial instruments that you can consider adding to your investment portfolio based on your budget and needs:
- Mutual Funds
These market-linked instruments are an excellent choice for new investors. Just like the best ULIP plan, you can either choose equity funds or debt funds, as per your risk appetite.
Investors who are able to take higher risks should go for equity funds, and risk-averse investors should stick to debt funds. You can invest your money in stocks, market funds, etc. Be sure to hire a reliable fund manager who can guide you through the best investment options for optimal returns.
- Public Provident Fund (PPF)
A PPF account is a good investment to manage personal finances. It is also an excellent choice for investors who are investing for the purpose of tax saving. This government-backed scheme offers you risk-free returns.
While the maturity period for PPF is 15 years, you are allowed to make partial withdrawals after completing six years. You can also claim deductions for the amount invested u/s 80C of the Income Tax Act. Additionally, the investors can also enjoy tax exemption on maturity benefit and interest earned on the principal amount.
- National Pension Scheme (NPS)
No financial planning is complete unless you make provisions for your retirement years. NPS is a government-backed investment scheme that lets you invest in market-linked instruments, such as equities and debt funds.
After staying invested for a minimum of three years, you are allowed to make partial withdrawals of up to 25%. You can also avail of tax benefits u/s 80CCD(1B) of the Income Tax Act.
- Unit Linked Insurance Plans (ULIPs)
The best ULIP plans are a must-have in any financial plan. But what is ULIP?
It is an investment and insurance product that gives you the best of both worlds. A ULIP plan divides your premium into two parts – one part is used to fund your life cover, and the other part is invested in funds of your choice. You can choose the asset allocation of funds as per your risk appetite. The best ULIP plansoffer returns when you stay invested for a minimum of 5 years.
Benefits of ULIP plan
If you are thinking about why you must add a ULIP to your financial portfolio, here are some reasons:
- Fulfils Your Long Term Goals
The best ULIP plans can help you reach your long-term financial goals, such as buying a house, paying for your child’s marriage, higher education, etc.
- Switching
ULIPs allow you to switch between debt and equity funds during the policy tenure as per the market sentiment.
- Tax Benefits
You can avail of tax deductions up to Rs. 1.5Lakhsunder section 80C. At the same time, you can also enjoy tax-free maturity benefits u/s 10(10D).
- Dual Benefit Of Insurance And Investment
The best ULIP plans give you an insurance cover along with the investment benefit. You can not only protect your family’s financial future with life insurance but also grow your wealth by investing in a range of funds.
- EEE Benefit
ULIPs fall in an exempt-exempt-exempt category, which means that the investor enjoys tax exemption at all three stages – investment, earning, and maturity.
Experts like Max Life Insurance recommend adding the best ULIP plans to your financial portfolio for its dual benefit. However, carefully review insurance providers’ websites to understand the policy benefits before investing.
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