Life is not a destination but it is a journey and is always topsy-turvy and unpredictable most of the times. However, we can face it and move ahead if we are well prepared for most of the life stage events and even can lead a very pleasant life too. There are lot of unanswered questions in life and need to find out solutions to them. By taking small and decisive steps over a period of time, we can make our life more predictable.
Before going forward, please try to answer the following questions
- Do you have a problem of cash shortage?
- Interested in maximising savings from current income?
- Do you have a sense of unpreparedness for next life event?
- Want to get more out of current investments?
- Have indifferences on money with family members?
- By the time of retirement, having a feel of need to depend on others for financials?
- Want to have more tax free income into your pockets?
If the answer to any of the above questions is “YES”, then definitely you need to prepare a plan for your FINANCIAL LIFE.
Need for it?
The only thing which is constant in the world is change. The world around is changing, our dreams change, our lifestyle changes, circumstances changes and ultimately we also need to change.
Life is an unplanned vacation, but it needs some planning to face the speed breakers, road blocks and other challenges.
Socio economic conditions are changing continuously and we need to adapt ourselves to those changes and make life easy. Rising expenses and improved life style, increased life style inflation, falling income and interest rates, emergence of new age financial products, career instability and reduced employer benefits, increased life expectancy, lack of defined benefit plans post retirement and nuclear families are the key concerns.
Are we ready to face the above challenges? No one can predict the future, but we can be prepared to face it. We need to be well equipped physically and fiscally to face these challenges.
Hence we need a blue print and a massive action plan which can help us to meet our responsibilities, needs, wants, goals, aspirations and dreams.
What is financial planning?
It is detailed actionable plan based on proven principles that are organised into strategic steps that will get you results with minimal wasted effort.
Financial freedom is a precarious event, and sensitive to failure at many levels. Achieving it is not difficult in theory, but in practice it is difficult, which is why very few people reach the goal.
The plan can be divided into two parts.
- Personal half and
- Financial Half.
In the personal half, it is more of realising personal habits and attitudes of all of the family members, spending nature, prioritisation of needs, wants, wishes, dreams, and attitude towards risk and returns, returns expectations.
One should also know his strengths and areas of opportunities where he can move higher in his career, and also should be aware of the weakness and threats so that they can be added into one’s personal financial plan.
In the financial half, it is more of rearranging your existing and expected resources and liabilities in an order to realise ones responsibilities, needs, wants, and realisable goals, aspirations, dreams and ultimately financial freedom at a faster pace than expected.
It includes, budgeting (to create a striking balance between current expenses, debt repayment, insurance coverage, contingent fund, investments for future goals, investments for retirement, taxes and allocation for personal development), creating savings , managing debt and credits, investing as a process, managing risk and protecting assets and finally managing taxes so that we are best planned for least taxation.
It is a process of creating the wealth somewhere, and then translating into personal assets, protecting them and leveraging them for growth.
Benefits of financial planning
Financial planning creates a road map to financial happiness, success. It allows individuals to take firm control of their finances and make best rationale decisions.
- Planned finances build trust and confidence in family members that everything is properly managed, within a realistic framework.
- Financial planning helps in listing, understanding, and prioritising, visualising and realising future goals. Future goals become transparent as per quantity and time wise.
- Planning of finances enables us to reduce the impact of the unforeseen financial crisis. You and your family are protected against contingencies.
- Financial planning helps individual by giving him rough estimate, and time line required to arrange the needed funds reasonably in advance and avoids him from unnecessary panic in arranging the finance in need.
- Financial planning helps in knowing risk profile and allows selecting suitable products and services which can help in making profitable investment decisions.
- Financial planning increases savings and can optimise the growth of your wealth.
- Financial planning helps in creating a suitable retirement plan.
- Financial plan helps in planning, reducing, or deferring taxes.
What can be the key hurdle in getting things done?
“Procrastination”, Yes it is “the world’s greatest wealth destroyer”. Let’s be realistic and get equipped to face anything.
On conclusion, if money is growing on trees, we might not need any financial plan, but in reality it does not happen, so we need a strong and actionable path to see success and realise dreams.
Hence still want to gamble with financial health, and toss your dreams and aspirations?