The years before, we mostly heard about the importance on financial planning, personal finance, investment management and retirement planning which has emerged as a buzzword. Many people actually were talking about the high importance of financial planning. So what is really financial planning and why it’s important?
Financial planning is the processes of meeting all of your life goals through a proper management of your finances. It is important that financial planning could help you in answering questions like where you are now (current personal balance sheet), what you need to do in order to reach your goals and with where you want to be in the future.
The process will involve gathering the relevant financial information, setting your life goals (children’s education, buying a house, etc.), examining on your current financial status and to come up with a strategy or plan with how you could meet your goals with the current situation you are in and your future plans.
Creating your financial plan needs some consideration on various things. This would also include your current financial status, outstanding loans, financial goals, retirement corpus, investment instruments, risk profile, tax liability, inflation, etc.
Financial planning likewise provides you with methods to organizing your financial future so you could plan ahead from any unforeseen. Organizing your finances will empower you to be independent and to also handle unpredictable events. Successful personal financial planning is crucial for anyone that wants to manage their financial difficulties and to help them accumulate wealth.
Financial planning is found to be crucial because:
It is able to help increase cash flow and will monitor your spending patterns. Cash flows are going to be increased through the case of undertaking measures like careful budgeting, prudent spending and on tax planning.
Proper financial estimate or plan which considers on the income and expenditure of an individual will help to choosing the right investment policy. This will also help the person to reach its set goals.
This will also help to gain an understanding regarding the current financial position. Adjustments on investment plans or evaluations with retirement schemes are now easier for people that has a financial understanding.
This is also very helpful in providing financial security towards your family. With proper insurance coverage and policies, it could give you peace of mind for you and your loved ones.
This also helps in achieving financial freedom.
The last thing would be in meeting financial goals and obligations.
Through an effective and proper financial planning, it will be able to help secure your financial future.