Over the past few years, we’ve heard terms like financial planning, personal finance, investment management, and retirement planning so often that they’ve become jargon. Newspapers, blogs, magazines, television channels and just about everyone under the sun seem to talk about the importance of financial planning. What is Financial Planning? More importantly, why is it so important?
Simply put, financial planning (FP) is the process of achieving your life goals through proper financial management. A budget planning process should help you answer questions like where you are today – your personal balance sheet today, where you want to be tomorrow – your finances related to your goals, and what you need to do to achieve them. In other words, what you need to do to achieve your goal.
This process includes gathering relevant financial information and setting life goals (eg, educating children, buying a house, buying a car). .
Developing a financial plan requires consideration of many factors. This includes the client’s current financial position, financial goals, outstanding loans, investment vehicles, insurance requirements, retirement corpus, inflation, risk profile, tax obligations and more.
FP gives you a way to plan for your financial future so you can be prepared for the unexpected. Organizing your finances will allow you to be independent and handle unpredictable life events. Successful personal financial planning is very important for anyone who wants to manage financial difficulties and accumulate wealth.
We get to our main topic, namely why it matters. Let’s understand one by one.
1. Helps increase cash flow and monitor spending patterns. Cash flow increases by taking steps such as tax planning, prudent spending, and prudent budgeting.
2. A proper financial estimate/plan taking into account your personal income and expenses will help you choose the right investment policy. It enables a person to reach a set goal.
3. It helps you understand your current financial situation. Adjusting an investment plan or evaluating a retirement plan is easier for individuals with financial savvy.
4. Providing financial security for your family is an important part of the FP process. Having the right insurance coverage and policies can provide you and your loved ones with peace of mind.