Financial planning is the process which provides you a framework for achieving your life goals in a systematic and planned way by avoiding shocks and surprises.
Financial planning is the process which provides you a framework for achieving your life goals in a systematic and planned way by avoiding shocks and surprises.
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Financial Planning Strategies
- Current Financial Situation
- Develop Financial Goals
- Alternative Courses of Action
- Evaluate Alternatives
- Implement A Financial Action Plan
- Revise Your Plan
Financial Planning Process
Financial planning is the process of developing a personal roadmap for your financial well being. The inputs to the financial planning process are:
The output of the financial planning process is a personal financial plan that tells you how to use your money to achieve your goals, keeping in mind inflation, real returns, and taxes.
In short, financial planning is the process of systematically planning your finances towards achieving your short-term and long-term life goals.
- your finances, i.e., your income, assets, and liabilities,
- your goals, i.e., your current and future financial needs and
- your appetite for risk.
The output of the financial planning process is a personal financial plan that tells you how to use your money to achieve your goals, keeping in mind inflation, real returns, and taxes.
In short, financial planning is the process of systematically planning your finances towards achieving your short-term and long-term life goals.
Can you manage without financial planning? Many people do, but they may find—often when it’s too late—that they don’t have the means to achieve their life goals.
For example, people today realize the importance of living life to the fullest. Consequently, many opt for early retirement from full time jobs, as compared to a few decades ago, when most people worked until the maximum retirement age of 58-60 years.
The average person can, today, expect to live a healthy life well into his or her seventies or eighties, which means that retirement life is almost as long as working life. Financially, it implies that savings (after taking into account inflation) should be enough, not just to maintain the same lifestyle for almost 25-30 years, with no new income, but also to take care of medical expenses, which are usually high the older a person gets. Planning for all this is a tall order for anyone. That’s why it’s critical for everyone to plan their finances from an early age.
For example, people today realize the importance of living life to the fullest. Consequently, many opt for early retirement from full time jobs, as compared to a few decades ago, when most people worked until the maximum retirement age of 58-60 years.
The average person can, today, expect to live a healthy life well into his or her seventies or eighties, which means that retirement life is almost as long as working life. Financially, it implies that savings (after taking into account inflation) should be enough, not just to maintain the same lifestyle for almost 25-30 years, with no new income, but also to take care of medical expenses, which are usually high the older a person gets. Planning for all this is a tall order for anyone. That’s why it’s critical for everyone to plan their finances from an early age.
Here’s a list of the benefits that a well chalked out financial plan can bring about:
- Helps monitor cash flows and reduces unnecessary expenditure.
- Enables maintenance of an optimum balance between income and expenses.
- Helps boost savings and create wealth.
- Helps reduce tax liability.
- Maximizes returns from investments.
- Creates wealth and ensures better wealth management to achieve life goals.
- Financially secures retirement life.
- Reviews insurance needs and therefore also ensures that dependents are financially secure in the unfortunate event of death or disability.
- Lastly, it also ensures that a will is made.
