Family financial plan- 7 steps of Financial planning for families

Family financial plan

Financial planning for families is the most important aspect of our life. In today’s society, making a family financial plan is necessary for people of all ages. Family financial planning is something you should be giving thought to when you are managing money for more than just yourself.

Financial planning for families can help you define your long-term and short-term financial goals and create the required plan to fulfill these goals. It helps you create a roadmap for fulfilling your dreams and stay on track while doing so. Through the use of the optimal mix of investments and insurance coverage, family financial planning enables you to prepare for retirement, purchase a home, and guarantee your children’s education.

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Rules of Financial Planning

Decide how much to save before spending

From the day you start earning, a part of your salary should be set aside as savings. After this, with the remaining amount, you can plan for your other important expenses. You may save less, but start saving as early as possible and get used to it. The golden rule is ‘Income-Saving = Your Expense.’

If you have decided on your future goals, figure out how much money will be needed for that. Keep saving regularly according to this need. Often people spend first and deposit what is left over for the future. This method is wrong. You first need to save for a rainy day and then spend.

How much to save

You should set aside a part of your salary as savings. You can start with a savings of 5 percent and increase it to 25 or 30 percent of the salary over time. With age our goals become important, so you should increase your savings gradually. Remember, saving here means investing your money in such places where you can get high returns. Keeping it in a bank account is not a savings.

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Debt repayment

The financial plan for your family needs to include any debt you may have, including credit card debt, student loans, and mortgages. You need a strategy and a timetable for paying back those loans in particular. Setting a priority list for your debts will help you pick which ones to pay off first when you have a lot of them.

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Emergency fund

Before you start investing, make sure you have a sufficient emergency fund. According to the rules, an amount equal to the expenses of at least six months in a savings account and short term or liquid fund should be kept as an emergency fund. In case of job loss or medical emergency, this money will come in handy and your financial goals will not be affected. That is why it is said that you should have a passive source of income and not be dependent on only an active source of income.

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Life cover

One of the most important points to be kept in mind while making a family financial plan is life cover. Life cover is very important for the financial security of the family. As per the rules, one should have a life cover of 10-15 times the total annual income of the household. This will help the other members of the family to maintain the living standard in the event of the death of the earning member of the household.

How much to save for retirement

There is no fixed rule, but a general rule is that a person should save 20-30 times his annual income for a good life after retirement. Although it may vary according to the needs of the person, on the basis of this rule, you can make your savings according to retirement.

Steps to Family Financial Planning

Financial planning for families is an ongoing process, and there is no perfect approach. You can choose the one that works best for you. Here are a few steps below that can help you create a better family financial plan:

1. Understand your financial status

The first important step while preparing a family financial plan is to observe your own expenses and know and understand your original financial status. Do you understand how your expenses are? And how many expenses are there? How much do you earn? How much do you save?

To know your own financial status, you have to divide your finances into two financial statements- Net Worth Statement & Cash Flow Statement. In the Net Worth Statement, write down your assets, debts and liabilities. With this you will be able to understand whether you have a property or not and if it is, then is it useful or not. This means that you will get to know about your Net Property very well.

In the Cash Flow Statement, you must write the source of your income? How much is your total income? How much are your expenses? How much money do you save in a month or a year?

When you calculate all these things properly then you will come to know about your financial status. From here you will have many Key Points –

  • How much net property do you have?
  • What is your net income every month?
  • How much control do you have over expenses?
  • Is Investment or Insurance enough for you?
  • How much of your earnings are going into paying the loan installments?

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2. Set goals

The second step for family financial planning is to set goals. For this also prepare a list – in which you write down all the things that you want to achieve in life. Write down all the things and also write when you need these things in your life?

Example- If you want to buy your own car and house, then write down completely after how long you need these things and what will be the total cost of those things?

In the same way, write down all the goals of your life in sequence, like-

  • When you have children, after how long and how much money will you need for their studies?
  • How much money should you have in your retirement fund when you retire?
  • If you have taken any loan, then by what time do you need to finish that loan?
  • If you want to travel abroad, when and how much money will you need?

3. Personal Financial Plan

In this, you have to prepare a financial plan according to your goals and your own financial situation. Many questions will come to your mind while making this plan.


  1. How much money will I have to save every month or in a year?
  2. How to achieve my goal if my income is less than my goals?
  3. What else can be done to increase income?
  4. There will be many different ideas of investment.
  5. How much to invest?
  6. How much to keep in emergency fund.

When this plan is ready, we can hope of a better and right way to reach our goals. We can feel that we can accomplish our goals. Along with this, we will also know how we can fulfill our goals?
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4. Invest in instruments that beat inflation

Inflation cannot be avoided. It erodes the value of the rupee over time. As such, you should invest in such instruments and asset classes that help you beat it. Here equities are present as the best betting option for you. This is because they are able to deliver inflation-beating returns.

You can invest directly in stocks or you can choose to invest in stocks through mutual funds. If you track the market and know enough about the numbers, you can buy stocks directly. If it is not, then it can be done through mutual funds.

Another investment option that beats inflation is chit funds which is a saving, investing and borrowing tool. Chit funds also have the ability to beat inflation and give you better returns (10%-15% p.a.) as compared to saving accounts, FDs, and RDs (3%-6% p.a.). The real returns you earn from your FD which is the difference between the interest rate and the inflation, might dip. But when you invest in a chit fund, you are borrowing from your own personal fund which is fluctuation-free. 

The Money Club is India’s trusted AI-driven digital chit fund platform. Chit funds are regulated by the respective state governments.. Our aim is to provide a savings solution that’s better, cheaper and more reliable than banking systems. Chit funds are one of the oldest forms of investments to grow your money. We currently have more than 3 lakh satisfied customers and formed more than 60,000 groups or clubs.

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5. Diversify your investment

This is one of the fundamentals of investing. When you diversify your investments, you are in a better position to deal with any volatility. This minimizes the risk and gives you the benefit of investing in different asset classes. One thing to note here is that different types of events affect different asset classes in different ways.

Diversifying helps you balance your portfolio and give it the needed stability. Overall, it can be said that just as all eggs should not be kept in the same basket, so should not the entire investment in one asset class. It should be diversified into market-linked and fixed income instruments.

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6. Implement the financial plan

See, nothing ever happens just by planning. Things happen when you follow that plan. If you follow all the other steps but do not follow this step, then all your work will be meaningless for you. So if you want to achieve your goals, then get ready to implement.

7. Reviewing your progress from time to time

It is important to implement the plan you make, but it is further necessary to review it. We must look at the following points while we review-

At what speed is our plan progressing?

How much profit is being made from the investment?

If the investment is not working, then new options should be explored?

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