Financial Planning helps you to determine your short and long term financial goals and create a balanced plan to meet those goals.
The proper planning of your finances has many advantages. First of all, financial planning brings a level of satisfaction to your mind and at the same time it prepares you for any financial needs that may arise in the future.
Financial Planning- Definition
A financial plan is a “comprehensive evaluation of an individual’s current pay and future financial state by using current known variables to predict future income, asset values and withdrawal plans”.
If we specifically look at the level of financial literacy in India, a large chunk(nearly 76%) of the adult population does not understand the basics of financial literacy. Above that, we all live in the myth that financial planning is only for rich people. This article will help you break this myth by focusing on the needs and benefits of financial literacy.
1. Why you need Financial Planning?
- Understand the financial situations
- Determine the Financial goals
- Create clear action steps
- Keep you on track
2. What is the importance of Financial Planning?
- Cash Flow
- Family Security
- Standard of living
- Financial Understanding
Why you need Financial Planning?
Every financial plan is unique, it is based on an individual's resources, expenditure, and requirements. But, the process to create a financial plan has four distinct steps, these steps will also justify your need for financial planning.
- Financial Planning helps you to develop a clear view of your financial situation today
- Financial Planning helps you to determine your financial goals – including a time frame
- Financial Planning helps you to create a plan with clear actionable steps to achieve your goals
- Financial Planning helps you to Implement the plan and follow up to stay on track. With changes in your life, your investments should also change
What is the Importance of Financial Planning?
Financial Planning is a crucial step in mapping out your future finances. With a financial plan, it's easier for you to make a financial decision and stay on track to meet your goals.
Here are 9 elements indicating the importance of financial planning --
Financial Planning helps you to manage your earnings more effectively. Proper management of your income helps you to understand and plan the expenses well. It will also make you aware of your monthly needs and expenditures, savings as well as your tax payments.
Maintaining adequate cash flows:
For Tax planning, prudent spending and well-analysed budgeting will help you to save more of your hard-earned money. Make sure you carefully monitor your different expenses and spending patterns before increasing your cash flows.
Planning to achieve financial security for your family is an important aspect of financial planning. With financial planning, you can have proper insurance coverage and policies that will provide you with the mental peace and security to the family during tough times.
A personal financial plan is developed looking at your personal circumstances like your specific income, expenditures, and requirements. It also focuses on your objectives of financial planning and risk tolerance.
Financial Planning acts as a guide when you have to pick an investment plan. It helps you choose the right type of investments to fit your needs, personality, and goals.
The standard of Living:
Well-Planned finance helps you to streamline your expenditures and create the savings from a good time. This saved money helps you to maintain your standard of living throughout your life.
Financial Understanding: You can easily understand the level of your financial understanding by analyzing the quality of your financial plan. You have achieved a good financial understanding, if your financial plan is measurable, the effects of decisions are understood and the results are reviewed. Sound financial knowledge gives a whole new approach to your budget and it also improves the control of your financial lifestyle.
A structured financial plan helps you to build the assets. But not every asset is easy to attain. Proper financial planning helps you understand the liabilities attached to an asset. Analysing the real value of an asset is important. It guides you towards the right decision that building assets don't become a burden for you in the future.
Savings supports you in your hard time. It’s also beneficial to have some investment with high liquidity. These investments are beneficial during an emergency situation, financial crisis or for education purposes.
It’s essential for you to understand the importance of financial literacy. Attainment and timely enhancement of your financial planning capabilities help you to provide a direction to your savings and expenses. Power to me in India is working towards the upliftment of financial education. Our major aim is to make you aware of the need for financial literacy and then empower you with the best of information so that you can utilize financial planning in your everyday routine. Our detailed course enhances your financial management skills and it guides you step by step to reach the ultimate goal. To join the course you can directly click here, for more information about our modules contact us now.