In India, a staggering 86% of adults feel unprepared for retirement, according to a 2022 survey by the National Pension System (NPS). This highlights the urgent need for effective financial planning that caters to every life stage — from the exuberance of youth to the serenity of retirement.

Here are some insights from experts, who explained in great detail about important financial strategies to CNBC-TV18.

Starting strong: Financial foundations for young adults

For young adults starting their financial journeys, establishing a solid foundation is crucial. CA Niresh Maheshwari, Director at Wealth Wisdom India, advises tracking income and expenses with a simple budget to manage debt and save efficiently.

A practical approach he recommends is the 50/30/20 rule, which allocates post-tax income into three categories: 50% for needs, 30% for wants, and 20% for savings and investments. This method simplifies budgeting and fosters disciplined financial habits.

Setting goals and making early investments

As young adults set financial goals, Maheshwari stresses the importance of prioritising these goals based on future costs. “Early investing takes advantage of compounding interest for long-term growth,” he says. By diversifying investments according to risk tolerance and staying updated on financial trends, young investors can build robust portfolios.

Saving for your future  

As individuals progress into early careers and family building (ages 30-45), Anil Rego, Founder and Fund Manager at Right Horizons PMS, emphasises the importance of increasing retirement contributions and saving for children’s education. He advises drafting a simple will and designating guardians for children as part of estate planning. “Save for a 20% down payment when purchasing a house and keep mortgage payments below 30% of your income. Plan your tax implications on property taxes,” he adds.

Challenges of succession planning

A crucial part of financial planning is succession planning. If you own a business, who do you hand over the baton to after you grow old? Often, there are disputes related to control and managerial responsibilities in family businesses. Some businesses bring in external professional managers to tackle such conflicts.

“It is important to have clarity on what plan B will look like and what should transpire in such situations. It is equally important to have this intent recorded through simple wills or the formation of trust structures, depending upon the complexity of the businesses and family units,” says Amit Pathak, Managing Director at Warmond.

“It is sometimes hard to keep emotions aside — emotions about the business, emotions about family members, insecurity about letting go, etc. Also, the next gen’s interest levels on continuing the business or capability to grow the business may not be in line with one’s expectations.”

Retirement savings

Anil Rego recommends maximising retirement savings and eliminating major debts in the mid-career stage, while estimating retirement income needs and creating a withdrawal strategy during the retirement and post-retirement stages. He encourages advanced estate planning to ensure wills and trusts are up-to-date and beneficiaries correctly listed.

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