Complete Guide to Family Financial Planning in India

Step 1: Track Cashflow and Build a Starter Budget

List monthly income, fixed expenses (rent, EMIs, school fees), and flexible spends (food, fuel, lifestyle). Use the 50/30/20 rule as a starting point—50% needs, 30% wants, 20% savings. If you have high-interest debt, push more to repayments.

Step 2: Insure First, Then Invest

Insurance transfers risk. Get adequate term and health cover before investing. Avoid mixing insurance and investment unless for specific goals.

Step 3: Goal-Based Investing

Map goals to time horizons and risk.

• Short term (0–3 yrs): Debt mutual funds, RDs, high-yield savings.
• Medium term (3–7 yrs): Balanced/Hybrid funds, conservative equity allocation.
• Long term (7+ yrs): Equity mutual funds index/flexi-cap, PPF, NPS.

Step 4: Automate and Review

Use SIPs for investments and auto-debits for savings. Review annually: increase SIPs with salary hikes, rebalance to target asset allocation, and update insurance.

Simple Starter Portfolio (Example)

• Emergency Fund: 6 months expenses in liquid fund
• Equity: 60% via Nifty 50/Next 50 index funds
• Debt: 40% via short-duration or Gilt funds

Common Mistakes to Avoid

• Buying endowment/ULIPs for returns instead of protection
• Investing before building an emergency fund
• Not disclosing medical history in insurance proposals
• Stopping SIPs during market falls

Key Takeaways

• Protect first with insurance and emergency fund
• Invest via SIPs aligned to goals and time horizons
• Review yearly and increase contributions with income