Over the past several years, we often heard of the terms like financial planning, investment management, personal finance, retirement planning and the likes. From blogs, newspapers, TV channels, magazines and just about every people is talking about the significance of proper financial planning. Having said that, what’s actually financial planning and why it is extremely important?
Put it simply, financial planning is the process of meeting your goals in life via proper management of your money. The process of planning your finances must help you answer questions similar to your current personal balance sheet, where you are today, where you want to be tomorrow, finances linked to your goals and to what you have to do in order to reach it.
As a matter of fact, it is a lot more complicated than what you thought as the entire process involves gathering relevant financial info, setting goals in life such as buying a house, buying a car, children’s education, examining your current financial status and even coming up with a plan or strategy to how you can meet these goals given your present situation as well as future plans. There are several factors that must be considered as well when you are developing a financial plan such as hiring a financial planner, current financial status of the client, financial goals, insurance requirement, investment instruments, outstanding loans, inflation, retirement corpus, tax liability, risk profile and so on.
Financial planning is providing a method to properly organize your financial future so by that, you will be able to plan for unexpected events in life. You are more likely to become independent and to deal with unforeseen events in life as you organize your finances with the help of an experienced financial advisor. Well thought financial planning is vital for anyone who likes to accumulate wealth and manage financial difficulties.
Earlier, we have mentioned that having a proper financial plan is very important but why is that so?
Number 1. This is capable of boosting your cash flow and monitor your spending habits as well. As you undertake measures similar to prudent spending, careful budgeting and tax planning, it can help in increasing your cash flow.
Number 2. In selecting the right investment policy, having proper financial plan or estimate that considers the expenditure and income of a person is a must. It allows the person to reach the goals they have set.
Number 3. Financial planning helps in gaining better understanding of current financial position. Adjustments in investment plan or evaluating retirement scheme is also easier for someone who understands their finances.
As a matter of fact, there are so many reason why it is crucial to have good financial advice but if this would not let you change your mindset on your money, nothing will.