Over the past several years, we often heard of the terms like financial planning, investment management, personal finance, retirement planning and the likes. From blogs, newspapers, TV channels, magazines and just about every people, they’re talking about the importance of proper financial planning. With this being said, what is actually financial planning and why it is extremely important?
Meeting your goals in life via proper management of your money is the simplest definition for financial planning. As for the process of planning your finances, it ought to help you find answers to questions such as your current personal balance sheet, where you are today, where you want to be tomorrow, finances linked to your goals and to what you have to do in order to reach it.
There are so many things involved in the process from gathering relevant financial info, setting goals in life such as buying a house, buying a car, children’s education, examining your current financial status and even coming up with a plan or strategy to how you can meet these goals given your present situation as well as future plans. When you are developing a financial plan, there are also countless of things to be considered such as hiring a financial planner, current financial status of the client, financial goals, insurance requirement, investment instruments, outstanding loans, inflation, retirement corpus, tax liability, risk profile and so on.
Through financial planning, it provides you a method on how to organize your financial future properly which then helps you to plan for unexpected events in life. You are more likely to become independent and to deal with unforeseen events in life as you organize your finances with the help of an experienced financial advisor. For all those who wanted to accumulate wealth and manage financial difficulties, it is vital for anyone to have a well thought financial planning.
We have mentioned earlier that it is very important to have proper financial plan but why is that so?
Number 1. It can boost your cash flow and monitor your spending patterns at the same time. The cash flow is increased as you undertake measures similar to prudent spending, careful budgeting and tax planning.
Number 2. In selecting the right investment policy, having proper financial plan or estimate that considers the expenditure and income of a person is a must. With this, it makes it easier for the client to reach their goals.
Number 3. Financial planning helps people to have better understanding of current financial position. For someone who understands their finances, it is easier for them as well to make adjustments in investment plan or evaluating retirement scheme.
As a matter of fact, there are so many reason why it is crucial to have good financial advice but if this would not let you change your mindset on your money, nothing will.