It has been a number of years since terms such as investment management, retirement planning, personal finance and financial planning is making a buzz. Blogs, television channels, newspapers and magazines are just few of the most popular sources in which these topics are being talked about. So it is not really surprising why many people question the 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 process of FP must be designed in helping you answer questions like where you stand today, your present personal balance sheet, where you like to see yourself in the future, finances that are linked to your goal and what you have to do be there.
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. As you see, there are a number of factors that ought to be considered when you are working on your financial plan. This includes the outstanding loans at the moment, financial status of the client and their financial goals, investment instruments, inflation, retirement corpus, insurance requirements, risk profile, tax liability and so on.
Financial planning is presenting people a method on how to properly organize financial future so by that, you can be ready to plan for anything unexpected in life. By organizing your finances, this can empower you to become more independent and at the same time, deal with unforeseeable events in your life. Effective and successful FP is crucial for anyone who wanted to manage their financial issues and become wealthy.
There are multiple benefit of considering financial planning some of these are discussed below.
Number 1. FP can increase your cash flow by way of monitoring your spending pattern. Cash flow could be increased by taking various measures such as prudent spending, careful budgeting and tax planning.
Number 2. Proper financial plan/estimate looks at your expenditure and income to be able to choose the best investment policy. This is very beneficial as it helps clients in achieving their financial goals way quicker than expected.
Number 3. It helps to have knowledge of your current 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.