Know About The Basics Of Financial Planning

These basic fundamentals are to be checked before thinking about retirement plans or investment portfolios.

Emergency fund: To cover emergency expenses, or to cover living expenses in case of business collapse and job loss, you should keep cash set aside. These funds are to be easily available. Most people should keep money set a side to cover the three to six months expenses. It depends on the number of persons in the family, earning income, living expenses and one’s tolerance of risk.

Liability insurance: You and your assets are protected from lawsuits for your actions or non actions by insurance company. Every one needs this liability insurance. Liability insurance is part of renter’s, homeowner’s, automobile and even in a separate umbrella insurance policy. This insurance is still valuable, even if you don’t have any assets. The insurance not only pays just for loss, but also for the lawyer to protect you. If you have more insurance then insurance company hires better lawyer for you.

Many individuals don’t know evaluating the available strategies and drafting financial objectives.

People make some common mistakes like:
a. Confusing financial planning with investing
b. Investing money only for the purpose of tax saving
c. Being careless for periodical review of the financial situation
d. Postponing the accumulation period
e. Waiting for quick for quick fix financial solutions instead of a long term strategy
f. Assuming unrealistic returns on investments
g. Giving insufficient importance to insurance

You can do your own financial planning when you can overcome these obstacles.