Financial Planning

What is Financial Planning?

Financial Planning is the process of deciding on the financial goals in life, calculating the financial requirements at various stages in life, chalking out an investment strategy & implementing it to realize the set goals.

  • The goals can be many like buying a new house, going on a long international holiday, planning for daughter’s marriage, retirement planning, etc.
  • Calculation of financial requirements at various points in life is a complex calculation involving time value of money, impact of inflation and various other parameters
  • Chalking out an Investment strategy requires knowledge of various asset classes, knowledge of portfolio management & understanding of financial markets
  • Investment in various asset classes needs information & detailed understanding of various products available in the market
  • The process of financial planning requires not only one time execution but periodic monitoring to manage various risks & adjust to market dynamics

Advantages of Financial Planning

  • It encourages disciplined savings which helps you to be more financially secure later
  • It helps ensure you have liquid funds when you need them the most
  • It helps you to get stable returns for short term goals corpus & higher returns for long term goals corpus
  • It includes tax planning which helps you to increase take home salary & to avoid paying a huge tax on investment income

Problems faced by people who don’t do Financial Planning

  • Inadequate savings to fulfil future goals
  • Need to take loans for all major expenses
  • Huge amount of debt makes it very difficult for a person to prosper
  • Unplanned way of investing may lead to huge losses & is also very tax inefficient
  • Years of ignoring financial planning can lead to financial insecurity