It has been a number of years since terms such as investment management, retirement planning, personal finance and financial planning is making a buzz. There are a number of sources where these topics are discussed from blogs, television channels, newspapers and magazines. 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 what you see, there are multiple factors to be considered when working on your financial plan. 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 provides ways for people to smartly organize their finances in the future so by that, it helps them become prepared on whatever that life could bring. By simply being financially organized, it is more than enough to help you deal with unexpected events in life by empowering you to be financially independent. Successful and effective FP is integral for anyone who likes to manage their financial problems and generate wealth at the same time.
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 can be increased by taking measures similar to 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 gain a good understanding of the current financial situation. Adjustments in investment plan or reviewing retirement scheme is easier for someone who knows financial knowledge.
If you want to ensure that you will become financially independent and spending your money wisely, then financial planning is something that shouldn’t be disregarded.