How to Plan your finances Calculate your total earnings. Calculate your total expenses. Net of point 1 and point 2 is your savings. Calculate your EMI paid to pay off your loans.EMI needs to factored while calculating one's net savings.  Set your goals over a period of time. The lesser the age, more is the time to build huge corpus for your retirement. One should set one's short term financial requirements. He/She should keep aside the money required in his/her savings account. One should diversify his funds (Net Savings) into various avenues in order to ride the fluctuations and uncertainities in short term as well as long term revenue earning avenues. One should  must hedge the uncertainity of one’s life by taking sufficient risk cover  through Insurance Policies (approximatilely risk cover should be 20 times one's annual income). One must invest in equities directly (secondary Market) or indirectly (Mutual funds), at least a portion of one’s savings in order to maximize his/her returns. (100-Age)% of total savings should be in equity (e.g. Ram's age is 30 years, he can invest 100-30 = 70% in equities as at this age he has more risk taking capacity). SIP (systematic investment plan)  is the best way to invest in equity by purchasing the units of respective Mutual fund at various rates at equal interval of time, thus averaging the overall cost of  investment. Avoid the loans which charge you high rate of interest or if  one gets some lumpsum amount, he/she should pay off those obligations in the decreasing order starting with the loan with higher interest rate. Home loan is the only loan which is always advisable since it pays you in various ways. E.g., it fetches you tax rebate and if you buy a property you earn handsome returns on annual basis (looking at the past returns, it fetches 15-20 % per annum returns. ELSS (equity linked saving scheme) is another way which fetches the tax rebate and upto 1 lac if invested in good ELSS fund, it translates handsome returns but the draw back from the investor’s point of view is that there is lock in period of three years in it. However, it is good for the AMC (Asset management company) since the fund managers get ample time to invest in long term avenues and have low redemption pressure and consequently pay back burgeoning returns to the investors. Tax saving FDs with lock in of 5 years/KVP/IVP which give fixed but lesser returns as compared to equity based schemes in the longer term horizon. Gold must be possessed in one's porfolio upto a maximum extent of 10-12 can be purchased in physical form as well as in electronic form through ETF (exchange traded fund). SIP (systematic investment plan) in gold funds is always advisable.

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