We frequently heard of terms similar to personal finance, investment management, retirement planning, financial planning etc. for the past few years. Blogs, television channels, newspapers and magazines are just few of the most popular sources in which these topics are being talked about. Because of this, there are a number of people wondering the true importance of financial planning.
Well basically, financial planning or simply FP is a process of attaining your life goals via correct management of your finances. The process of FP must be designed in helping you answer questions like where you stand today, your present personal balance sheet, where you like to see yourself in the future, finances that are linked to your goal and what you have to do be there.
The entire procedure will require to prioritize your life goals such as buying a home, securing children’s education, getting a car, gathering relevant information, reviewing your financial status and then, devise a strategy or plan on how you will be able to reach these goals given your plans as well as situations. When working on financial plan, there are several things that must be considered. This includes the outstanding loans at the moment, financial status of the client and their financial goals, investment instruments, inflation, retirement corpus, insurance requirements, risk profile, tax liability and so on.
Financial planning presents people a way on how they can organize their financial future properly so by that, you can be more prepared for anything that life has to bring. By organizing your finances, this can empower you to become more independent and at the same time, deal with unforeseeable events in your life. Successful and effective FP is integral for anyone who likes to manage their financial problems and generate wealth at the same time.
There are multiple benefit of considering financial planning some of these are discussed below.
Number 1. FP increases your cash flow by tracking your spending pattern. Cash flow can be increased by taking measures similar to prudent spending, careful budgeting and tax planning.
Number 2. Proper financial plan/estimate looks at your expenditure and income to be able to choose the best investment policy. This is very beneficial as it helps clients in achieving their financial goals way quicker than expected.
Number 3. It helps to gain a good understanding of the current financial situation. Adjustments in investment plan or perhaps, reviewing retirement scheme becomes easier for a person who has basic or broad financial knowledge.
You should never ignore financial planning if you want to have more control of your money and achieve financial independence.