What is Financial Planning
Financial planning is a stepwise approach to determining how you would meet your life goals with your money. A good financial plan will help you to remain in control of your expenditures and investments at all times. It evaluates your goals, helps you prioritize, save and invest money tosh targets in the defined time.
Financial planning can also be defined as the process of organizing your money to achieve personal financial satisfaction. You will be able to control your financial situation by following such a planning process.
Every individual, family, and a household has a unique financial position and all financial activities must be meticulously designed to meet certain needs and expectations.
A detailed financial plan strengthens the quality of life and boosts your contentment as it does away with all anxieties about your future needs and resources.
The particular advantages of personal financial planning include greater effectiveness in obtaining, using, and protecting your financial resources throughout your life.
Financial Planning (FP) Importance
Financial planning plays an important role in giving direction to their goals. It helps you set short-term and long-term goals in life and helps you make financial decisions more easily.
Financial planning instils discipline in terms of utilizing your money. You cut on excessive expenditures and begin saving. The following points will help you in understanding the importance of financial planning;
- FP helps in managing income
A good financial plan helps you manage your income better. We need money for our basic needs but occasionally tend to spend on unnecessary amenities. Planning your finances will keep a tab on your expenses and will help you save a great deal.
- Help choose investments
It is essential to have a financial plan for choosing investments in line with your income, risk capacity, and goals. This will help you maintain a balanced investment portfolio at all times.
- Financial Planning ensures retirement lifestyle
Proper financial planning will always have your retirement objectives listed, including your earnings and expenditures as detailed as possible.
- Financial Planning also helps in taking care of the estate
A financial plan will lead those taking care of your finances to organize their estate with efficiency. Financial planning comprises of estate planning, which means the smooth dispersion of your wealth after your death. Without estate planning, according to probate attorneys, the court could designate how your assets will be divided, which means you won’t have any control over whoever will get everything that you’ve worked so hard for.
Main Objectives of Financial Planning
Personal financial planning fills you with a sense of freedom from financial worries by helping you anticipate expenses.
- Medical Emergencies
Medical expense is an area where cash flows out suddenly. Therefore, the first part of your monetary plan should be focused on safeguarding yourself and your family through a good medical claim policy.
Doing so will also take care of any unexpected expenses related to medical emergencies. Besides protection from medical expenses, you can also avail of tax benefits under the Income Tax Act.
- Insurance
The term insurance component of financial planning offers you the much-needed protection from the uncertainties. Term policies require low premiums and they also provide maximum protection, making them cost-efficient.
- Children’s future
One of the main objectives of a financial plan is to keep us prepared beforehand for our children’s expenses, be it their education or marriage.
Mutual fund investments can help secure our children’s future. Investment in equity mutual funds or children’s fund can help build a corpus of wealth until they turn into young adults.
- Retirement
Proper financial planning will always help you plan better for your retirement period straight from the beginning of your career.
You can choose investment methods for example mutual funds, bank fixed deposits or invest in the stock market through expert advice. This will help in timely creating a retirement fund for you so that you lead a comfortable and relaxed retired life.
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