What's a good financial plan? Expert reveals what makes a financial plan bulletproof

Financial planning involves setting goals, assessing your financial situation, managing debt, creating a budget, and saving and investing money to meet important life objectives. It also includes tax planning, insurance planning, and estate planning, helping individuals make informed decisions to achieve both short-term and long-term goals.

A comprehensive financial plan can assist in controlling unnecessary spending, effectively managing debt, and selecting appropriate investment opportunities. It is a holistic process that encompasses various strategies to enhance your financial position and reach your financial goals and objectives in a timely manner.

According to financial planner A K Mandhan, a solid financial plan for investors should include the following key elements:

Health Insurance with a minimum coverage of Rs 5 lakh
Pure Term Insurance with a minimum coverage of Rs 1 Crore
Emergency fund equivalent to at least 6 months of expenses in Fixed Deposits
Regularly investing in Gold ETFs
Holding a minimum of 3 Mutual Funds in the portfolio
Contributing to NPS for retirement planning.

"Here is a Simple Financial Plan that works ! 1. Health Insurance ( min 5 lakh); 2. Pure Term Insurance ( min 1 Crore); 3. Min 6 months emergency fund in FD; 4. Buy Gold etf regularly; 5. 3 Mutual Funds minimum; 6. NPS for retirement," Mandhan noted.

Let's look at the investment tools suggested:

Choosing a health insurance

Given the annual medical inflation rate of approximately 15%, customers can help manage increasing costs by selecting policies with appealing bonus features. A bonus signifies an extra amount insured that insurers provide to policyholders. Choosing a health insurance plan is not only a wise financial decision but also a necessity for achieving peace of mind, especially during health-related challenges.

To begin, evaluate your current health and medical background to determine immediate coverage needs. Take into account potential future health concerns based on your family's medical history and lifestyle choices. For instance, if diabetes or heart disease runs in your family, a comprehensive coverage plan for these conditions may be preferable. Keep in mind that your health insurance requirements evolve with different life stages.

In 2024, the government approved health insurance coverage for all senior citizens aged 70 and over, irrespective of their income, under the flagship initiative Ayushman Bharat Pradhan Mantri Jan Arogya Yojana (AB PM-JAY). Senior citizens aged 70 years and above from families already covered under AB PM-JAY will receive an additional top-up cover of up to Rs 5 lakh per year for themselves, which they do not need to share with family members below 70 years of age.

Term insurance plans

In 2025, various insurance companies in India are coming up with advanced term insurance plans with additional benefits to cater to the changing financial needs of individuals. These term insurance policies provide a coverage of Rs. 1 crore, serving as a crucial financial tool to safeguard your family's financial well-being in your absence. The substantial sum assured ensures that your loved ones are not faced with financial strain due to rising living costs, inflation, or unexpected expenses. A term insurance plan acts as a pure life cover policy, offering peace of mind by ensuring financial security for the nominee in the event of the policyholder's demise during the term of the policy. 

A coverage of Rs 1 crore guarantees that your loved ones will receive a substantial financial safety net, accommodating key expenses such as:

Daily living costs
Outstanding debts and loans
Education and marriage expenses for your children
Medical emergencies and unexpected liabilities

Term insurance, unlike conventional life insurance policies, does not provide maturity benefits. However, it offers a cost-efficient means to obtain extensive coverage at reasonable premiums.

Emergency fund
Having an emergency fund provides a financial cushion for unforeseen expenses, minimizing the reliance on costly loans. A recommended approach to establish an emergency fund is by saving an amount equal to six months' worth of salary. This fund plays a vital role as a safety measure in situations such as job loss, inability to work due to injury, or unanticipated essential costs.

Investing in gold ETFs

Investing in gold is often considered a safe option during times of market volatility. Digital gold and ETFs are viewed as superior forms of investment compared to physical gold, which some may even view as a form of consumption. Recently, gold prices reached a historic high of Rs 91,250 per 10 grams in the national capital. As of March 21, 2025, the MCX spot price for 10 grams of gold was Rs 87,821. In the current calendar year 2025, gold prices have increased by 17%, surpassing returns from both equity and debt investments. It is not unreasonable to anticipate gold prices surpassing Rs 1 lakh in the near future.

A gold ETF is a fund that allows investors to trade gold on a stock exchange. The value of a gold ETF is directly tied to the price of gold, offering several advantages for investors in the gold market.

Gold ETFs offer easy tradeability, allowing investors to buy or sell them in the stock markets with ease. This enables individuals to maximise gains by selling their ETFs in the open market whenever they wish to liquidate their investment. Conversely, if ETF prices are trading lower, investors can swiftly purchase units through their demat account.

Mutual funds

Mutual fund investment is a popular tool among Indians. According to the Economic Survey of 2024, the Indian capital market boasted approximately 17 crore unique investors by December 2024, encompassing both mutual fund and direct investors. Of this figure, approximately 5.20 crore investors were engaged in mutual funds, indicating that 30.6% of total capital market investors had opted for mutual fund investments. Amid market correction past few months, market experts have recommended adopting a diversified approach to mutual fund investing. While mid- and small-cap funds are currently showing a decline in returns, experts assert that selecting fund categories should be viewed from both a long-term and short-term perspective. 

National Pension Scheme

The National Pension Scheme (NPS) in India is widely popular as a pension-oriented product that offers a range of investment options. Indian citizens and NRIs can invest in low-risk equity funds, security funds, or alternative investments through the NPS scheme, providing good returns.

By investing in NPS, you can benefit from tax advantages of up to Rs. 1.5 lakh under Section 80C and Section 80CCD of the Income Tax Act, 1961, depending on whether you have a Tier-I or Tier-II account. While the funds in NPS have a lock-in period until retirement, there are provisions for premature withdrawals in specific circumstances for unforeseen financial needs.

Overall, choosing NPS over fixed-income schemes can offer you advantages and help you plan for your future retirement while maximizing your tax benefits. Although the lock-in period for NPS schemes typically lasts until retirement, it is possible to make early withdrawals under certain circumstances to address unexpected financial needs.