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Aug 04, 2011, 10.55 AM IST | Source: Moneycontrol.com

Guide to financial planning

FINANCIAL planning. If that word is a put off, don't let it be. It's the all important word in your money dictionary. Here, we simplify it for you.

Guide to financial planning

Step 2 – Prepare to invest

Investment planning is simpler than you think, and more rewarding than you would imagine.

Your age and investment size does not matter, nor do you have do be a money whiz – just do it NOW. So where do you start?

Identify your financial goals
What are your goals? What are you saving for – A house? Child's education/ marriage? New car? World tour? Retirement? Quantify this in terms of amount of money needed, and time horizons.

To understand the process of defining and quantifying your future goals, use our Retirement Planner . Even if you do not have retirement planning as one of your financial goals, this planning tool should help you understand the process of financial goal planning.

Understand your risk profile
Depending on our income and needs, we all have different capacity for risk. We also have a different risk tolerance, based on our individual psychological make-up. Understand your risk profile and plan your portfolio accordingly.

Find out: Your risk profile

Plan your asset allocation
Returns should not be your primary objective; you could end up taking more risk than you are financially/ psychologically capable of. It helps seek expert advice and create a portfolio with the right spread across asset classes to minimise risk of incurring a loss.

Calculate: Your asset allocation

Go to step 3: Start investing

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