Financial Planning Essentials: Tips

Sound personal financial planning in India for FY 2026-27 starts with defining goals, then building a 6-to-9-month emergency fund, taking term life insurance of 10 to 15 times annual income, and family health cover of at least ₹10 lakh. Choose between the new tax regime (default, with ₹3 lakh exemption and ₹7 lakh effective zero-tax via Section 87A rebate) and the old regime by running both numbers. Set a goal-linked equity-debt allocation, use NPS or EPF for retirement, and rebalance annually.

Priyanka Wadhera

Published: 1 Sept 2023

Updated: 16 May 2026

4 min read

Financial planning in India has changed shape in FY 2026-27. With the new tax regime as default, deeper PFRDA participation, NPS reforms, and a maturing mutual fund industry crossing ₹65 lakh crore in AUM, the building blocks of a sound personal financial plan are now standard. What separates a good plan from a great one is sequencing — knowing what to do first, second and third.

Start with goals, not products

Most retail investors begin with a product (a ULIP, a fixed deposit, a chit fund). Sound planning reverses the order. Define your three to five year goals, your ten to fifteen year goals, and your retirement corpus target. Each goal has a time horizon and a risk tolerance — and the product follows from those, not the other way around. Use real numbers: target ₹X crore in Y years, inflation-adjusted.

Build the foundation: emergency, insurance, debt

Emergency fund: 6 to 9 months of expenses in a sweep-in savings account or liquid fund
Term life insurance: 10 to 15 times annual income, pure term plan, no investment hybrid
Health insurance: family floater of at least ₹10 lakh, plus a super top-up of ₹50 lakh
Eliminate high-cost debt — credit card, personal loan — before any market-linked investment

Tax planning under the new regime

The new tax regime for FY 2026-27 offers a basic exemption of ₹3 lakh, a standard deduction of ₹75,000 for salaried taxpayers, and a Section 87A rebate that makes incomes up to ₹7 lakh effectively tax-free. The old regime is still available but is now relevant mainly for taxpayers with significant 80C, 80D, HRA and home loan interest deductions. Run the numbers both ways before electing — the right choice is taxpayer-specific.

Asset allocation as a discipline

Define equity-to-debt mix based on age, goals and risk profile — a common starting point is (100 minus age) in equity.
Within equity, blend large-cap index funds, flexi-cap actively managed funds, and a small mid-and-small-cap allocation.
Within debt, use a mix of PPF, EPF, debt mutual funds and short-duration government securities.
Add an inflation-linked layer — gold or sovereign gold bonds at 5 to 10 per cent of portfolio.
Rebalance annually to maintain the original allocation.

Retirement: NPS, EPF and beyond

The National Pension System under PFRDA continues to be a low-cost retirement vehicle with auto and active choice options. Section 80CCD(1B) provides ₹50,000 additional deduction under the old regime. EPF for salaried employees, with the employer match, compounds powerfully across a career. For self-employed professionals, building a private retirement corpus through equity mutual funds with a 20-year SIP is statistically the most reliable path.

Behavioural pitfalls that derail financial plans

Even the most carefully designed financial plan fails when behaviour gets in the way. Common pitfalls include stopping SIPs during market corrections, switching investments based on short-term performance, mixing investment and insurance through high-cost hybrid products, underestimating inflation over long horizons, and ignoring estate planning. Build behavioural guardrails into the plan: automate every SIP and EMI, separate investment from insurance, maintain a clear written investment policy statement, and schedule reviews on a calendar — not on news cycles. A registered investment adviser or fee-only financial planner can provide objective input during emotionally charged periods. The discipline of process matters more than the brilliance of any single decision for long-term financial outcomes.

Estate planning and the often-ignored will

A financial plan without an estate plan is incomplete. Every adult with material assets should have a will, even a simple one — listing assets, beneficiaries, and an executor. For larger estates, a properly drafted trust can offer tax efficiency, professional management, and protection of beneficiaries with special needs. Nominations for bank accounts, insurance policies, mutual funds, demat accounts, and EPF should be updated annually. The Indian Succession Act, 1925 (for non-Muslims) governs intestate succession — a will overrides default succession rules and prevents family disputes. Engaging an estate planning lawyer for a clear will costs little and saves enormous time, cost and emotional stress for the family.

Conclusion

Financial planning is not an event — it is a quarterly discipline. In FY 2026-27, set up the foundation (emergency, insurance, debt-free status), choose the right tax regime, build a goal-linked asset allocation, and review every six months. The plan should fit on one page. If it doesn't, simplify until it does — complexity is the enemy of consistency.

Frequently Asked Questions

Should I choose the old or new tax regime in FY 2026-27?

The new regime is now default and offers a ₹3 lakh basic exemption, ₹75,000 standard deduction for salaried taxpayers, and Section 87A rebate making incomes up to ₹7 lakh effectively tax-free. The old regime suits taxpayers with significant 80C, 80D, HRA and home loan interest deductions. Run the calculation both ways before electing.

How much emergency fund should I keep?

Maintain six to nine months of essential monthly expenses in a high-liquidity instrument such as a sweep-in savings account, liquid mutual fund, or short-term debt fund. The exact size depends on income stability, dependants, and job sector. Self-employed professionals should target the higher end of this range.

Is NPS a good retirement product?

Yes, for most salaried taxpayers and self-employed individuals. NPS offers low costs, regulated fund management under PFRDA, flexibility between equity and debt, and tax efficiency. Section 80CCD(1B) under the old regime provides an additional ₹50,000 deduction. However, the lock-in to age 60 and partial annuity requirement at exit should be factored in.

How much equity should be in my portfolio?

A useful starting point is (100 minus your age) percent in equity, adjusted for risk tolerance and goal horizon. For someone aged 30, this implies 70 per cent equity, declining over time. Goals with a horizon below five years should sit largely in debt, while long-term retirement goals can sustain higher equity allocation.