Engineers Day 2022: Top 10 Financial Planning Tips For Engineers

Engineer’s Day is around the corner. Every year, it is celebrated on the 15th of September to commemorate the contribution of Mokshagundam Visvesvaraya, an engineer who built great architectural marvels during his time. He also earned the Bharat Ratna in 1995 for his contribution to the field of engineering. Thus, Mokshagundam Visvesvaraya’s birth anniversary has been named Engineer’s Day in India.

The day celebrates engineers, their contribution and their success. This year, how about helping them achieve their financial freedom too?

Here’s a look at the top ten financial planning steps for engineers so that they can manage their finances easily yet effectively.

1. Make a budget:

The first step in attaining financial discipline is to create a budget. This helps identify your income and expenses. So, draw up a budget listing down your sources of income on one side and expenses on the other. Deduct the expenses from the income to get the disposable income, i.e., the income that you can set aside for your future needs.

2. Say ‘No’ to unnecessary spending habits:

If your expenses are more than your income or your spending habits are not wise, you must consider taking corrective actions. Try and weed out unnecessary expenses from your budget. You may either consider reducing them or cut them off completely. This may help you save more so that you can easily meet your goals.

3. Plan for emergencies:

Emergencies come unannounced. An illness or an injury, a sudden financial crisis, premature death, loss of job, etc. can incur a considerable amount of money. This can land you and your family in a financial crisis. That is why preparing for emergencies in advance is a prudent course of action.

When it comes to planning for emergencies, life and health insurance plans help. A term life insurance plan provides financial security in the case of death during policy term.

Similarly, health insurance plans takes care of the financial repercussion of a medical emergency. So, you may consider investing in these plans and prepare yourself for emergencies.

4. Try and supplement your income:

Try and look for alternative sources of income that can boost your overall income. For instance, if you have a property, you may rent it out to earn rental income. You may also consider investing in dividend-yielding assets to generate a regular stream of dividends.

Additional income would help boost your investments and help you plan your goals easily.

5. Manage your debt:

Loans can be burdensome, especially if they take away a major part of your income. So, debt management is important. Pay off high-interest loans first, like credit cards, personal loans, etc. Also, keep your affordability in mind when taking a loan. Ensure that the EMIs are affordable and can be repaid without hurting your budget.

Also, you can consider securing your loan repayment under a term insurance plan. This would help in ensuring that your loan liability is paid off even when you are not around, and the burden does not fall on your family.

6. Identify and plan for your financial goals:

Financial goals are your responsibilities. You need to identify them and prioritise them. Common goals include planning for your child’s future, buying a house, buying a car, going on an international vacation, etc.

Identify your goals and list them in order of priority. Next, estimate the corpus that you would need for each goal so that you can save accordingly. You can also use the life insurance calculator offered by Bajaj Allianz Life and calculate the corpus needed for your goals.

7. Retirement planning should start early:

When you are young, retirement might seem far away and take a backseat in financial planning. However, this is not wise. You should start retirement planning from an early age. This would give you two benefits. One, you would have time on your side to allow your corpus to grow. Two, you can save affordably and still build up a suitable corpus.

So, start saving for retirement. A life insurance pension plan can help you create an earmarked retirement corpus based on your risk appetite and asset allocation. You may consider investing in these plans and start building a fund for your retirement.

8. Start a disciplined saving habit:

Savings are essential to save up for your financial goals and stay away from debts. So, start a disciplined saving habit wherein you save every month steadily.

9. Create a diversified portfolio:

When creating a financial portfolio, diversify. A diversified portfolio would help mitigate investment risks. You can consider investing in Unit Linked Insurance Policy (ULIP) as ULIP is an insurance plan that offers the dual benefit of investment to fulfil your long-term goals, and a life cover to financially protect your family in case of an unfortunate event. The premium paid towards a ULIP is divided into two parts, wherein the first part is contributed to your life cover, and the remaining is invested in the market-linked fund of your choice like equity, debt or combination of both, as per your risk appetite and goals.

10. Review your financial plan regularly:

Creating a financial plan is not a one-time process. You need to review your plan regularly to ensure it stays on track. Regular reviews help weed out mistakes and correct any deviations. Moreover, you can assess if you are saving enough so that if there’s a shortfall, you can step up and create the desired fund for your goals.

Common financial mistakes engineers make

Engineers are good with numbers, designs, and statistics, and yet when it comes to finances, they may make mistakes. Here are common financial mistakes that an individual may commit and their solutions too.

1. Mistake #1 – Spending a lot, especially in the earlier years of life when the family responsibilities are low, and disposable income is high.

Solution – Budgeting and cutting down on unnecessary expenses. If the investment can be stepped up in the earlier phase of life, then the power of compounding can work in the engineer’s favour to build a healthy investment portfolio.

2. Mistake #2 – Buying consumer goods and other expensive devices on EMI with high credit card expenses, thereby having a lopsided debt portfolio.

Solution – Always make a plan for your debts, both when availing them and also in repayments. Try to repay the high-interest loans first, such as credit card and personal loans.

3. Mistake #3 – Delaying retirement planning.

Solution – Start retirement planning at the earliest so that the power of compounding can help to step up the retirement corpus.

4. Mistake #4 – Not investing according to asset allocation and risk profile.

Solution – Strategize and systemise your investments. Invest regularly, i.e., every month, before you spend. Pen down the financial goals and then invest accordingly.

5. Mistake #5 – Not planning for emergencies.

Solution – Plan for them in advance to stay financially secure during emergencies. Life insurance plans offered by Bajaj Allianz Life can help you do that. Use the life insurance calculator and opt for the right coverage amount.

Conclusion

So, this Engineer’s Day, spare a thought for sound financial planning. Avoid the aforementioned mistakes and plan your finances so that you can achieve financial independence.

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