What is financial planning?
Financial planning is the method of fulfilling your life goals through the adequate management of your finances. The financial life goals entail buying a home, saving for your child’s education & marriage, planning for your retirement, etc. It is a procedure whereby a skilled financial consultant will contemplate your whole financial situation and goals and provide you with ethical action steps to achieve your dreams and better organize your finances. It is not a one-time process but is continual as your life situations and finances change over time. You furthermore require to regularly evaluate your financial plans & your investments to assure that you are well on the trail to fulfilling your financial goals/objectives. You can also visit financial planners, who share personalized advice to improve your personal finances in 2021.
Why is financial planning needed?
Given the nature of today’s life, with rising uncertainty, surging aspirations, and heightening living costs, performing thorough financial planning has become a must for each of us. A specific case to mention is Retirement planning, which has become very significant since the average life expectancy has intensified.
Most of us do not have sufficient knowledge about financial planning. Only in recent years has there been some heightening understanding about it. Most of us, though, yet understand that they are informed and smart enough to decide upon their finances unassisted, overlooking the fact that this is a massive issue that needs professional expertise.
In the absence of proper financial planning, the following are the risks faced by a client:
- Continued lack of understanding of your financial situation
- Delay and wastage of critical time for planning for goals
- Continuous exposure to financial risks in life to you and your family
3. The financial planning process:
- Establish and define the relationship
- Sharing of information
- Analysis and assessment of your financial status
- Development of financial plan recommendations and presentation
- Implementation of recommendations
- Review your financial situation
4. Advantages of financial planning:
To summarise, the following are the key reasons or benefits that you would get from financial planning.
- Proper understanding of your financial situation
- Finalization of the financial goals and knowing what it would take to achieve the same
- Understanding your insurance needs and ensuring financial security
- Understanding how your financial decisions and choices will impact your economic well-being
- Having a path laid out for you and your family’s long term economic well-being