Time to plan your finance in March

Well today is the first day of the current financial year. According to me today is the best day to plan your finance for the year ahead (contrary to many that March is all about making investment and saving taxes). Do it today because you get a whole year to correct mistakes, adjust your budget, monitor the ROI of your investments. More than anything you would earn from investments for a whole year.

"He who fails to plan is planning to fail." Sir Winston Churchill

Now that you know planning is important, your question would be How to do make a proper financial plan for a year. (This is only a basic idea. For more elaborate plan, contact your CA, CFA, CPA, etc.)

1. You know how much money you have made during last financial year. Assuming you would make 10 percent more this year you income would be 10 percent more (say you made Rs.10,000 last year. This year you would be making Rs.11,000). So now you have a rough idea how much you would make in current financial year.
2. Now before you start how calculating how much money you will be spending. Put aside 10 percent of your income for Investments (the percentage is supposed to be minimum 10 percent. The higher, the better)
3. Now you are left with 90 Percent of your Income, that you would be earning (in our example you would be left with Rs.99) budget it. Make a list of expenses that you will be required to incurred. Classify them into various categories like household, travelling, food, mortgage, education, entertainment, Shopping, etc. The more you categories you can classify it into the better (this would help you identify which are the expenses that are pure waste of money and can be eliminated)
4. Now that you have made the budget. Let's go back to the 10 percent of the income that you have kept aside for Investments. Please I have used the word Investments not savings. Both have huge difference in them. So now classify this into 2 types. Long term (30 percent of 10 percent that's like about Rs. 330) and short term (70 percent of 10 percent that's about â‚¹770). Long term investments are to be made for your retirement, buying house, building & acquiring assets that would give you financial freedom. Short term investments are for something that you would need in immediate future like some medical emergency, for buying a new vehicle (btw this is a liability not an asset).
5. Now, consider all the investment options available. There are many traditional and non traditional. Like stocks, mutual funds, gold, silver, house, antique, paintings, wine, etc. For making long term investments stocks, business, house, wine, etc. are the best (P.S. to reinvest the returns you get. Power of compounding is beautiful) and for short term you can use Mutual Funds, Fixed Deposits, Short Term Mutual Funds (debt funds), etc.
6. While working on step 5, please consider Tax planning and insurance in it. Because it's important to plan how to save the investments from misfortune.
7. Now that you have done everything. You have the biggest task to do. Follow the above plan throughout the year monitor your plan, correct it for better, stick through it.

Thank you for reading. Incase of any suggestions, clarification please feel free to contact.