Financial planning is the process of assessing financial goals of an individual, taking an inventory of the money and other assets which the person has, determine life goals and then take necessary steps to achieve goals in the stipulated period. It is a method of quantifying a person’s requirement in terms of money.
Financial Planning is a comprehensive exercise which includes investment management, cash flow planning, taxation planning, insurance and risk management, retirement planning and estate planning, where the focus consistently remains long term.
You must be wondering that “why should I plan?”
So let’s see if you can answer the following questions:
Are you sure that with such high inflation, the money you are saving for your Childs graduate studies from a college of his choice will be enough?
Do you have any idea if the sum total of your retirement benefits like PF and gratuity and PPF is going to be sufficient for your post retirement needs?
Would you know the financial state your family will be in, if you die suddenly today, tomorrow, 5 or 10 years later?
Should you use your bonus to prepay a part of your home loan or invest it elsewhere?
Answers to questions like this and many others are what you will have with a FINANCIAL PLAN.
A financial plan charts the course of your life and helps you plan for the big and small goals of your life – it equips you with the knowledge to take better decision and to make choices.
It is basically the process of meeting life goals through the proper management of finances. Financial planning is a process that a person goes through to find out where they are now (financially), determine where they want to be in the future, and what they are going to do to get there. Financial Planning provides direction and meaning to persons financial decisions. It allows understanding of how each financial decision a person makes, affects the other areas of their finances.