Financial planning is nothing but it’s a step-by-step process or approach to meet our personal life goals. As we know, money is an important factor in our life and a financial plan acts as a guide as you go through your life’s journey. Additionally, it helps you to control your income, investments, and expenses such that you can manage your money according to your income and achieve your personal necessary goals.
In life, money is the key that helps you to achieve your goals and desires. And financial planning is the most important to fulfill all your needs at the right time. For example, if you want to buy a house so you have to do financial planning to get your house at the right time of your life like how much you should spend in a month so you can save a particular amount of money after two to three years those money becomes enough to get a short time loan for a house.
So, now may be a question arising in your head about the importance of financial planning. We will discuss it in this article below. With the importance of financial planning, we will also discuss the benefits of financial planning and it”s strategies.
Importance of financial planning?
If you have a question in your head about the importance of financial planning then you are at the right place to understand it better. Financial planning is the key to be prepaid for any situation. Let’s know a few important aspects of financial planning.
- Tackle your inflation.
Financial planning is important to achieve your goals and desires but how? Have you ever heard from your parents or your grandparents that things were so cheap back then? If your answer is yes then you got it why financial planning is important. Inflation is nothing but the phenomenon of raising the prices of goods over years. Let’s understand it better by taking an example.
Assume that the price of rice is Rs. 10 per kg. And you have rupees 100. With this amount, you can buy 10 kg of rice for yourself. And after that, you have another 100 rupees that you keep in the bank that offers you an annual interest rate of 5%. So, at the end of the year, you have rupees 105 with you. But over one year, assume that the price of rice has increased to Rs. 11. It means that you have to pay 110 rupees for the same 10 kg rice. But you have only rupees 105 in your bank, you fall short of rupees 5.
This is how inflation mugs out one’s savings. It reduces your purchasing power over time, and you have to pay more for the same product you need. You can tackle inflation by investing in the avenues that offer you better return over time but for this, you have to make important financial planning.
- Create your retirement corpus
As we know, day by day the medical field is becoming more advanced. That means the people are now going to live more in their retired lives. And this is undoubtedly a piece of good news. So, you can enjoy yourself more with your family, you can fulfill your passion and dreams can travel the world. But the question how will you fund all these expenses? So, you have to make financial planning.
- Manage your money
Why should you manage your money? Because satisfying your family members is not so easy. Maybe your child wants to go camping this summer vacation or maybe your oldest daughter is ready to join college even though you may face emergency financial needs due to any reason. so, financial planning is important. You can keep your money in the bank to save it but in comparison to mutual funds, it’s not the better option.
- For an emergency fund.
As we know, the future is so uncertain. Anything can happen at any time. Maybe you face a medical emergency in the future or maybe you lose your job. So, for this emergency uncertain situation you have to be prepared for the worst. Every time financial experts advise investors to keep an amount with you that equals a 6-month salary for emergency purposes. Even in this covid pandemic, many people have faced it.
Benefits of financial planning:
● Increases your valuable savings.
● Help you to live a better standard of life.
● Preparing you for emergencies.
● Help you to Attain peace of mind.
● Wealth creation.
● Make a better retirement planning
● To give your child a better education option.
● Saving tax.
To get all these benefits of financial planning first you have to get the right investment option for you and your family. To choose the better options go through all the steps I have written for you. Even, go through a financial advisor that will help you to find suitable investment options.
5 steps to create successful financial planning.
It is very crucial to make strategies that help you to create successful financial planning. As I already wrote above, that is why financial assistance is important. Let’s know about 5 strategies that help you to create successful financial planning.
- Determine your current financial assistance
Firstly, you should understand the status of your current finances such as your expenses, income, savings, debt, and investments. This will help you to improve your financial planning.
- Make a list of your financial goals.
Simply write down your financial goals. Such as I want to buy a car worth rupees 10 lakh in 16 months or I want to buy a luxury watch worth rupees 24 thousand in 2 months. Remember, don’t hesitate to write your goals because no goal is big and small.
- Wisely choose the investment options.
There are numerous investment options for you so choose wisely which investment will fulfill your dreams and desires. The mutual funds market alone had around 2000 schemes. Different investment avenues help the investors to reach their goals. For example, equity funds are perfect for long-term goals like child education.
- Make the right plan.
Select the right investment option based on the factors such as your dreams, age, appetite, and risk. If you are unsure about which fund investments are right for you, take a look at a financial advisor. These are certified professional financial advisors who help investors make investment options. They also help in insurance, retirement planning, taxation, and estate planning.
- Monitor your financial plan regularly.
Investing your money is not the end of your financial planning. You also have to monitor how the funds are performing on a regular basis. If they do not perform well then immediately replace them with better performing funds. You also have to follow your plan as you grow older day by day and your dreams and goals evolve.
As we know, Benjamin Franklin has said that “if you fail to plan, you are planning to fail.” You may have different kinds of financial goals and you are wishing to achieve them but to reach them at the right point in your life you should make a financial plan first. Looking for financial assistance from the federal government. Read along the article to get all the information you need.