Financial Planning

Financial Planning involves channelisation of our funds towards the fulfillment of our goals.

All of us have some desires and needs, like that of buying a car in a couple of years, buying my own house before I turn 40, want my children to go in a good university for higher studies, planning for retirement etc. When it comes to realizing these goals we have no definite plans. We just leave it all on mercy of God and expect everything to fall in place. Eventually, in most of the cases, we do not achieve our  intended goals in a manner we wish to and our dreams end up being just that – dreams. Mostly our daily life is focused on arranging finances for our immediate needs, like our child’s school fee, arranging funds for next month’s EMI, buying clothing for coming festival and likewise. It’s not as if we don’t think about securing our future and achieving long term goals, but day-to-day routine activities leave us with little time to give our future a serious thought. Among those who understand finance, some feel that just by investing their money, they have done their job. They believe investing in some financial product, property, gold or some other avenue, will in itself accomplish their goals. But it doesn’t work that way.

Financial issues we must consider are:

Cash management – it includes preparing and following a budget, fund planning for emerging needs, using credit wisely and keeping the income tax burden to the lowest level possible.

Risk management – We all face the risk of losing both life and property. Here insurance comes in the picture like life insurance, health insurance, vehicle insurance, disability insurance, property and casualty insurance. So, this should be given serious thought and proper steps should be taken.

Accumulation goals – like saving for education and marriage expenses for children. Buying a home, build an investment portfolio and list goes on.

Financial independence – Planning for retirement is important for all of us.

Estate planning – Death is inevitable but few plan for ultimate transfer of their assets to their heirs.

Financial planning is “The process of meeting life’s goals through proper management of finances”. It helps in taking control of our finances. It assists us in curbing short-term temptations in favour of more important long-term goals.

An individual avoids doing structured planning due to following reasons:

• Tendency to delay- Some common excuses are- “I don’t have time”, “It’s too hard”, I’ll worry about it tomorrow”, “I have other things to do”. There are no clear deadlines.
• Tendency to live beyond one’s means- Money spent today cannot be invested to achieve tomorrow’s goals. Sacrificing instant wants to achieve future needs is a tough task when done without guidance.
• The lack of financial knowledge.

To do your financial planning:

• Evaluate your present financial situation.
• Set financial goals and prioritize them.
• Identify the gap between future goals and current financial situation.
• Analyze your life, health and general insurance needs.
• Devise an asset allocation strategy and select investment products.
• Make an action plan.
• Monitor your financial situation periodically. 

If you are unable to do it yourself, one can hire certified financial planner for the same.

In the end, I would like to say financial planning has four pillars:

• Goals
• Investment
• Discipline
• Determination

                                                     Happy Planning!