Financial planning advice has become ubiquitous on social media. This widespread availability of information was supposed to make money management accessible to everyone. Instead, it has created an environment where sensational content drowns out practical guidance. Algorithms favour stories of people earning ₹30,000 monthly while supposedly building ₹5 crore portfolios, or trading strategies that promise quick wealth.
The truth about building wealth is straightforward: 99% of long-term financial success comes from executing basic principles consistently. Sustainable wealth creation requires following the proven steps methodically over time.
Step 1: Build an Emergency Fund
Keep at least 6 months of household expenses in an autosweep bank account or a liquid fund where you can withdraw money instantly. This is non-negotiable. Life throws curveballs, and when it does, you need cash you can access immediately without penalties or waiting periods.
Step 2: Get Health Insurance for the Entire Family
Choose the highest sum insured, and the total premium should be 5% of your annual income. But here’s what matters more than the coverage: pick a plan with minimal conditions and restrictions. Look for open, flexible structures rather than policies loaded with asterisks and exclusions.
When health emergencies arrive, you don’t want to discover that your policy won’t cover you because of some obscure clause you missed.
Step 3: Get Term Insurance Right
For every earning member in your household, especially those with dependents, take a term which is 20x of your annual income. Add only a critical illness rider and an accidental disability rider. Get coverage until age 60, 65, or a maximum of 70. This single decision protects your family’s financial future if something happens to you.
That’s it. You don’t need any money-back plans, premium-return features, or lifelong coverage.
Step 4: Start Your Retirement Planning with NPS
Open a National Pension Scheme (NPS) account and start investing based on your retirement goals. There are plenty of free retirement calculators available online that can help you figure out how much you need to save.
Yes, NPS has liquidity constraints, and returns aren’t guaranteed. But it remains one of the most tax-efficient and disciplined ways to achieve your retirement corpus, which is locked in till 60 years age.
Step 5: Hedge Against Country Risk
For long-term goals, anything beyond 7-10 years, buy gold ETFs to diversify and hedge against country-specific risks. Not physical gold, which comes with GST, making charges, and storage hassles. Even gold coins attract unnecessary charges.
Secure Your Children’s Future
If you have a daughter under 10, open a Sukanya Samriddhi Yojana account. For a son, a Public Provident Fund account works well.
Why This Works (And Why You Won’t Follow It)
Once you plug these details into any decent financial calculator, you’ll know exactly where you stand. It sounds almost too simple, and that’s precisely why most people ignore it.
Instead, they chase intraday tips, trading momentum, and short-term growth hacks. You might see impressive screenshots at parties or on social media, but here’s what nobody mentions: 4 out of 5 people lose money in trading. The losses don’t make for good Instagram posts.
What to Do After You’ve Done the Basics
After following these 5 steps, if you still have surplus money, then, and only then, consider investment in stocks. Don’t get distracted before you’ve secured the basic fundamental pillars of personal finance.
Conclusion
Real financial planning is about doing a few simple things consistently over time. Take adequate insurance, invest for retirement, build an emergency fund, and protect your family’s future.
The question isn’t whether this plan works.
The question is: will you actually do it?
Finology is a SEBI-registered investment advisor firm with registration number: INA000012218.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.
