We all have certain goals in life, things we wish to achieve, cars we wish to buy, countries we wish to visit. Inflow comes in form of earning from a regular 9-to-5 job, business or other sources. But seldom are we able to attain our goals in spite of having adequate financial resources. The main reason behind this lacuna is the inadequacy of financial planning which otherwise imparts a direction to the journey towards goal fulfilment and financial freedom.
- Timely planning of finances aids in money management which paves the way for easy allocation between monthly expenditure and meeting the savings target.
- Careful monitoring of expenses and spending pattern and bringing the same under control pumps up cash flow which can be reinstated with prudent spending, tax planning and capital budgeting exercises.
- Overall capital accumulates faster with increased cash flow which can now provide you with greatest investment opportunities.
- Financial planning seals the security perimeter of your family especially when they are in dire need of the same. Having mediclaim and insurance coverage brings along through peace of mind.
- Windfall occurrences can throw you off the track. A carefully thought out portfolio with ample liquid alternatives can help out in such emergency scenes.
- Financial planning makes us all the more responsible and disciplined while dealing with money matters as now you would think twice before splurging to your heart’s content.
Financial decisions impart meaning and direction through in-depth financial planning. It helps us in understanding the inter-relationship between various financial decisions and up to what extent they affect our other financial areas. For example having a certain mutual fund in our portfolio can insure us during the golden retirement age or help us in faster mortgage pay off. By keeping a holistic view you can gauge both long and short term effects of the same in propelling you towards or moving you away from your life goals. Having set aims assists with greater security and easy adaptability to a changed scenario.
Think of them as the doctors of finance who can cure your monetary ailments with advice which can surely bring upon far-fetched benefits. They survey financial situation of every single patient visiting their clinic and suggest the perfect cure which can bring the best of tax saving, retirement planning, investment guidance and budgeting advice. The planners might alternatively also work toward transforming a certain financial aim of yours into a heart-warming reality. The hawk eye view approach of these planners sets them a class apart from the advisory folk who predominantly focus on just a particular jurisdiction.
Self-sufficiency in Financial Planning
The pursuit of financial happiness ends with a dynamism which gets accentuated by a large number of magazines, websites and self-help books summing up the entire territory of financial planning within a couple of pages for those who would rather do some personal research than barge upon experienced financial planners. However, you might pay your planner friend a visit in the following scenarios:
- If you wish to herald an improvement in your current financial stand but are clueless about where to start from. Click here to get advice from experts!
- If you are in need of professional level expertise which casual browsing of self-help books can’t give you. For example, a trained financial planner can evaluate the risk level of your investment portfolio and adjust the same according to changing family circumstances.
- If you feel the sudden need of guidance after unexpected events such as unplanned birth or untimely death of close family member which brings down your self-planned financial castle.
- If you wish to verify the soundness of your drafted plan with certain experts who know the business like the back of their hand.
The Financial Planning Steps
- Goal setting :- Having clearly defined goals makes the journey towards attaining the same much easier. So rather than wishing for a comfortable retirement life decide upon the total corpus you wish to build before retiring and monthly allowance you wish to reap from the same to sustain your livelihood.
- Understanding the deep-rooted effect of every financial decision taken :- Proceeding with a certain investment plan promising lucrative return may actually bring along a heavy tax burden which can have a negative effect on your overall estate planning. Every decision taken in the financial plethora are related to each other. You need to keep this in mind before proceeding with a certain decision so that they don’t harm any other aspect of your daily finance.
- Periodic re-evaluations :- The ever-changing financial planning process might also alter the goal you wish to attain at the end of a certain time span with changes in lifestyle and associated circumstances like marriage, inheritance, house purchase, birth, job change etc. Thus constant revision is necessary so that these changes get reflected in your portfolio and you can stay in loop with the next in line goals.
- Start early :- Being a late bloomer in the field of finance will distance you further from the financial enlightenment process. Developing good habits such as budgeting, saving, investing and constantly reviewing finance decisions from an early stage will position you better than those who start late.
- Realistic expectations :- Remember that you cannot bring a paradigm change in your financial standing overnight. It is a continuous process rather than a day’s job. Events such as variation in interest rate, stock market corrections and inflation are totally beyond your control but might alter your financial stand for better or for worse. Thus it is advisable to keep realistic expectations from your investments with handsome buffer for negative events lurking around the corner which might have detrimental effects on your pre-defined financial plan.
Financial Planning Myths Busted
Myths surrounding the financial planning segment are plenty but thankfully financially literate people are busting the above-mentioned myths on a regular basis and showing others the right way ahead.
- Wait until a monetary crisis to start with Financial Planning: On the contrary, planning of finances should be started since the very beginning of your career so that minor setbacks can’t cause widespread damage to your normal life flow.
- Financial Planning can be afforded only by the rich sector:– Financial planning is for everyone who wishes to set money goals, organise their finances and draft a plan for reaching those goals. It is true that certain financial planners target only the wealthy group but the majority provide affordable services irrespective of the income or net worth of the client.
- Go ahead with financial decisions without thinking of consequences: When we are engaging in financial planning to safeguard ourselves from the uncertain future, then why should we travel the same path with our choices? Current actions should be well in sync with future aims we have in store. If you have plans of buying a new car after 5 years then you should engage in such financial planning which will push you towards this goal as a lump sum received at the end of the seventh year will fail to solve the crisis created at the end of the fifth year.
- Start with the planning part once your hair starts showing grey strands :- Retirement planning remains to be one of the foremost causes of financial planning amongst the growing urban population. While we are young and working we have ample funds at our disposal. But with age increases responsibility which makes retirement funding all the more difficult as you will have immediate issues to attend to like school admission of children and medication of aged parents. Starting out early always brings along heaps of benefits.
- Seeking help from Financial Planner means losing control over your portfolio :- Certified financial planners usually surpass the minimum industry requirements of the regulated finance spectrum. You will be appointing them as your watchdog. This necessarily does not mean that they will become the sole controller of your wealth. The final call will always rest upon you, the planners will merely be your advisors.
- Tax planning is the core objective of Financial Planning :- Just like investment value appreciation, tax planning also forms an essentially functional element of financial planning but it surely is not the core aim. Financial planning holds a holistic view of the customer’s entire wealth of which tax planning is just a small part.
- The Financial Planning drill ends with the hiring of a certified planner :- The truth is just the contrary. Appointing a home tutor will not ensure that your child will score top marks. You need to overlook his education from time to time and assess his knowledge level through occasional tests. The financial planning also does not end once you have entrusted a planner with your wealth. You need to keep a check on the same and report negative variations whenever you see them.
- Investing and Financial Planning are two sides of the same coin :- Investing undoubtedly helps in portfolio building but financial planning is a broad concept which brings insurance, budgeting, retirement planning, estate planning and WILL Planning under its purview.
Even the top seers cannot predict the future with 100% guarantee. But having a sound financial plan in place can surely help out in tiding over turbulent times.