We frequently heard of terms similar to personal finance, investment management, retirement planning, financial planning etc. for the past few years. There are a number of sources where these topics are discussed from blogs, television channels, newspapers and magazines. So this leads us up to the question why financial planning is very important?
Well basically, financial planning or simply FP is a process of attaining your life goals via correct management of your finances. The process of FP ought to be designed to help you answer questions like your personal balance sheet at the moment, where you stand now, where you want to be down the road, your finances linked to your goal and what you must do to get there.
The procedure involves gathering all the relevant information, setting your life goals like children’s education, buying a car and home, evaluating your current financial status and also, come up with a plan or strategy on how you could meet these goals given your situation and plans. When working on financial plan, there are several things that must be considered. This will include the present financial status of the client, outstanding loans at the moment, financial goals, insurance requirements, investment instruments, inflation, retirement corpus, tax liability, risk profile and so forth.
Financial planning provides ways for people to smartly organize their finances in the future so by that, it helps them become prepared on whatever that life could bring. By simply being financially organized, it is more than enough to help you deal with unexpected events in life by empowering you to be financially independent. Successful and effective FP is integral for anyone who likes to manage their financial problems and generate wealth at the same time.
There are many benefits of considering financial planning and these include but not limited to:
Number 1. Through FP, you will have a way of tracking your expenses which then helps you to become more conscious on your spending. Cash flow could be increased by taking various measures such as prudent spending, careful budgeting and tax planning.
Number 2. Proper financial plan/estimate that is considering expenditure and income of an individual can help in selecting the best investment policy. This is very beneficial as it helps clients in achieving their financial goals way quicker than expected.
Number 3. It helps to have knowledge of your current financial situation. Adjustments in investment plan or reviewing retirement scheme is easier for someone who knows financial knowledge.
If you like to ensure that you are going to be financially independent and that you are smartly spending your money, financial planning is one thing that must not be ignored.