It has been a number of years since terms such as investment management, retirement planning, personal finance and financial planning is making a buzz. There are multiple sources where these topics are being talked about like blogs, television channels, newspapers and magazines. So it is not really surprising why many people question the importance of financial planning.
Simply speaking, financial planning or FP is the process of achieving your life goals through the correct management of your finances. The FP’s process should be created in a way that it answers your questions from your finances linked to your goal, what you ought to do in order to get there, where you stand today, where you want to be in the future and your current personal balance sheet.
The entire procedure will require to prioritize your life goals such as buying a home, securing children’s education, getting a car, gathering relevant information, reviewing your financial status and then, devise a strategy or plan on how you will be able to reach these goals given your plans as well as situations. As what you see, there are multiple factors to be considered when working on your financial plan. 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 being able to organize your finances, this could empower you to be more financially independent and deal with any unexpected events in life. Effective and successful FP is crucial for anyone who wanted to manage their financial issues and become wealthy.
There are multiple benefit of considering financial planning some of these are discussed below.
Number 1. FP can increase your cash flow by way of monitoring your spending pattern. Prudent spending, careful budgeting and tax planning are some of the measures applied in increasing cash flow.
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 gain a good understanding of the current financial situation. For a person who is aware of finances, it will be easier for them to adjust in investment plans or review retirement scheme.
If you want to ensure that you will become financially independent and spending your money wisely, then financial planning is something that shouldn’t be disregarded.