We frequently heard of terms similar to personal finance, investment management, retirement planning, financial planning etc. for the past few years. There are a number of sources where these topics are discussed from blogs, television channels, newspapers and magazines. Because of this, there are a number of people wondering the true importance of financial planning.
Well basically, financial planning or simply FP is a process of attaining your life goals via 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 procedure does involve gathering all the relevant information, setting up life goals like do you want to buy a car or home, children’s education etc. assessing your financial status at the moment and come up with a strategy on how you will be able to achieve these goals. When working on financial plan, there are several things that must be considered. 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 presents people a way on how they can organize their financial future properly so by that, you can be more prepared for anything that life has to bring. By organizing your finances, this can empower you to become more independent and at the same time, deal with unforeseeable events in your life. Successful and effective FP is integral for anyone who likes to manage their financial problems and generate wealth at the same time.
There are many benefits of considering financial planning and these include but not limited to:
Number 1. Through FP, you will have a way of tracking your expenses which then helps you to become more conscious on your spending. Prudent spending, careful budgeting and tax planning are some of the measures applied in increasing cash flow.
Number 2. In order to select the best investment policy, proper financial plan/estimate always take a good look of the person’s financial income and spending. It just allows the client to achieve their financial goals faster.
Number 3. It is very wise of you to take a look of your financial situation. Adjustments in investment plan or perhaps, reviewing retirement scheme becomes easier for a person who has basic or broad financial knowledge.
You should never ignore financial planning if you want to have more control of your money and achieve financial independence.