For the past several years, we frequent heard of terms like investment management, personal finance, financial planning, retirement planning and such. There are multiple sources where these topics are being talked about like blogs, television channels, newspapers and magazines. So this leads us up to the question why financial planning is very important?
Simply speaking, financial planning or FP is the process of achieving your life goals through the correct management of your finances. The FP’s process should be created in a way that it answers your questions from your finances linked to your goal, what you ought to do in order to get there, where you stand today, where you want to be in the future and your current personal balance sheet.
The procedure involves gathering all the relevant information, setting your life goals like children’s education, buying a car and home, evaluating your current financial status and also, come up with a plan or strategy on how you could meet these goals given your situation and plans. As you see, there are a number of factors that ought to be considered when you are working on your financial plan. 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. Through FP, you will have a way of tracking your expenses which then helps you to become more conscious on your spending. Cash flow could be increased by taking various measures such as prudent spending, careful budgeting and tax planning.
Number 2. Proper financial plan/estimate that is considering expenditure and income of an individual can help in selecting 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 have knowledge of your current financial situation. For a person who is aware of finances, it will be easier for them to adjust in investment plans or review retirement scheme.
If you like to ensure that you are going to be financially independent and that you are smartly spending your money, financial planning is one thing that must not be ignored.