Do You see yourself owning a new home, starting a business, or retiring comfortably? These are a few of the financial goals that may be important to you, and each comes with a price tag attached. That’s where Financial Planning comes in.
Financial Planning is a process that can help you reach your goals by evaluating your whole financial picture, then outlining strategies that are tailored to your individual needs and available resources. “It is an exercise aimed at identifying all the financial needs of an individual, translating the needs into monetarily measurable goals at different times in the future and planning the financial investments that will allow the individual to provide for and satisfy his future financial need and achieve his life goals.”
The importance of Financial Planning is as follows:
1. Provides direction and meaning to financial decisions
2. Helps understand how decision in one area effects other areas
3. Helps evaluate short and long term effects of decisions on one’s life goals
4. Ability to establish long term relationships
5. Ability to build a profitable business
Investment Planning:
Under investment planning, strategies are made for future investments. You can plan for the type of investment and the proportion of investment you want. You can allocate your funds to various investment vehicles such as mutual funds, NPS, ELSS, etc.
Tax Planning:
Financial planning also helps in solving your tax issues. Under tax planning, financial strategies are made to decrease tax liability. For maximum tax savings, you can plan to invest in fixed deposits, NPS, PPF, ELSS, etc.
Retirement Planning:
Under retirement planning, strategies are made to ensure you retire rich. At the time of retirement, you need a huge corpus to fund your lifestyle for 20-30 years, and retirement planning helps achieve it. It will help you estimate the amount you would need to retire and how much you should invest in making it possible.
Budgeting:
Under budgeting, your income and expenses are analyzed, and on the basis of that, financial plans are made. It is focused on minimizing costs and debts and increasing your disposable income.
Insurance Planning:
Insurance provides financial assistance in times of emergency. Insurance planning helps you identify the type of insurance you require and how much your insurance should cover.