For the past several years, we’ve been hearing of the terms such as financial planning, investment management, personal finance, retirement planning and the likes. Starting from blogs, newspapers, TV channels, magazines and just about every people, they are all talking about the true importance of financial planning. With this being said, what is actually financial planning and why it is extremely important?
Meeting your goals in life via proper management of your money is the simplest definition for financial planning. The process of planning your finances must help you answer questions similar to your current personal balance sheet, where you are today, where you want to be tomorrow, finances linked to your goals and to what you have to do in order to reach it.
There are so many things involved in the process from gathering relevant financial info, setting goals in life such as buying a house, buying a car, children’s education, examining your current financial status and even coming up with a plan or strategy to how you can meet these goals given your present situation as well as future plans. There are several factors that must be considered as well when you are developing a financial plan such as hiring a financial planner, current financial status of the client, financial goals, insurance requirement, investment instruments, outstanding loans, inflation, retirement corpus, tax liability, risk profile and so on.
Through financial planning, it provides you a method on how to organize your financial future properly which then helps you to plan for unexpected events in life. Organizing your finances with the help of a professional financial advisor will empower you to become independent and to deal with unforeseen events in life. Well thought financial planning is extremely important for anyone who wants to accumulate wealth and manage financial difficulties.
We have mentioned earlier that it is very important to have proper financial plan but why is that so?
Number 1. It can boost your cash flow and monitor your spending patterns at the same time. As you undertake measures similar to prudent spending, careful budgeting and tax planning, it can help in increasing your cash flow.
Number 2. It is a must to have proper financial plan or estimate that considers the expenditure and income of a person as this helps in choosing the best investment policy. With this, it makes it easier for the client to reach their goals.
Number 3. People are more likely to have better understanding of current financial position through financial planning. Adjustments in investment plan or evaluating retirement scheme becomes a lot easier for someone who has understanding of their finances.
Whether you believe it or not, there are many other reasons why having a good financial advice is crucial but if this doesn’t change your point of view, nothing would.