Building a legacy: Financial planning tips for fathers of all ages
This Father's Day, it is worth reflecting on one of the most enduring responsibilities fathers carry: ensuring the financial well-being of their families. Regardless of whether you are just embarking on your financial journey or are in a position to guide the next generation, adopting a structured approach to money management can have a lasting impact. Here is a streamlined framework to help you take control of your finances with clarity and discipline.
A strong financial foundation begins with a consistent savings habit. Aim to set aside 20–30% of your monthly income, adjusting to your current capabilities. The objective is not perfection, but discipline. Establishing this habit enables long-term stability and provides a powerful example for your children and dependents.
Organizing your savings into three distinct buckets allows for better clarity and purpose:
Prioritize the creation of an emergency fund by allocating ~5% of your income until you accumulate at least six months of essential expenses. Place these funds in highly liquid, low-risk instruments.
Assign another ~5% to near-term needs such as education, home upgrades, or planned purchases. Debt mutual funds or fixed deposits are suitable vehicles.
Dedicate the remaining ~10% (or more) toward long-term objectives such as retirement or legacy planning. Equity mutual funds—whether actively managed or passively tracking indices like Nifty 100 or Nifty Midcap 150—can be effective for wealth accumulation.
Implementing simple rules can prevent reactive or emotion-driven financial decisions:
On receiving a windfall or bonus: Allocate at least half of it toward your three financial buckets before considering discretionary spending.When withdrawing funds: Access the emergency bucket for unforeseen expenses and the short-term bucket for pre-planned outlays.For risky investments: Engage only if you're consistently saving above 30% of your income and limit such exposure to no more than 5% of your overall portfolio.
Upon reaching a milestone—such as your long-term investments equating to five times your annual expenses—consider transitioning from a simple system to more advanced portfolio strategies. This includes asset allocation, risk diversification, and periodic rebalancing, often in collaboration with a trusted financial advisor.
Create a habit to save at least 20% of your income. Keep it simple in the initial years of your career by following the 3 Bucket approach of Safety bucket, Short term bucket and Long term bucket. Create Pre-Defined Rules for investing new money, withdrawal and investing in high-risk investments. When your portfolio value is more than 5x of your annual spending, then focus more on Asset allocation, Diversification and Rebalancing.
This framework will help you take charge of your financial decisions and keep the topic of money, saving and spending simple and less time-consuming. By embracing this framework, you not only secure your own financial future but also model enduring values for generations to come.
(Author of the article - Jiral Mehta is Senior Research Analyst at FundsIndia)
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