Financial planning is a process of setting goals (For example buying a house/car, child’s education/marriage, retirement corpus etc), assessing income, assets, investments, expenditure and liabilities, estimating future financial needs, and making plans to achieve them. There are many elements which are involved in financial planning, including budgeting, investments, Taxes, estates, retirement, insurance etc.
Financial planning plays a crucial role in helping individuals get the most out of their money. A good plan can help in creating long term wealth and provide considerable immunity against fluctuating economy. It also provides protection against the unexpected events like loss of income or major illness. Financial Planning is different for different people and depends highly on income level, age, risk appetite, responsibilities etc. What suits one person may not be suitable for another. However there are some components which remain common across plans.
Planning, creating and managing capital accumulation to generate future capital and cash flows for achieving pre-determined goals and spending
Managing cash flow risks through risk management and insurance products
Planning to ensure financial independence at retirement including PPF,EPF and other pension plans
Planning for the reduction of tax liabilities and the freeing-up of cash flows for other purposes
Planning for the creation, accumulation, conservation and distribution of assets
Maintaining and enhancing personal cash flows through debt and lifestyle management
Many individuals choose to use the services of financial planners to help them reach their goals. A qualified planner can help you navigate through the whole process by virtue of his training and experience. Before you use the services of a financial advisor go through this article: Do you have the right financial advisor. A basic financial plan can also be created by referring to self help books and online resources.
People often delay planning for the future. In good times the value of a plan is not realized but it seems so logical when some unfortunate event happens. Do not procrastinate something as important as this. Start with creating a budget. Prepare a budget and track your monthly expenditure. It will help you find ways to trim or even eliminate unnecessary or out-of-control expenditures.