Financial planning involves preparing a comprehensive statement of the long-term goals for your security and well-being. It also includes a savings and investing regime to achieve those goals. It is an important activity for any individual who wants to make the most out of their current circumstances; regardless of the amount of money they have. Let us look at it this way: Everyone has taken a trip at some point in their life. How smoothly the trip goes is almost always connected to the amount of planning involved. In many cases, be it a vacation or a work commitment, a well-planned approach is essential for your peace of mind. Your finances work in a similar way. A thorough plan for your finances can allow you to achieve your goals during the journey of your working and retired life; and see that you and your family remain comfortable, secure and stress-free in that process. If you have not considered financial planning yet, here are just a few reasons why you should: 

Risk Management:

Every financial plan includes a facet to identify the right quantum of insurance you need to secure yourself, your family and your assets. In this sense, you will have at least minimum coverage which includes basic health, home and vehicle insurance, in the event of an accident or medical emergency. By preparing for these contingencies ahead of time, you can ensure that your goals and family’s welfare are not affected by mounting bills. While these insurances protect you more during your lifetime, what is also important is to protect against the untimely death of an earning member. Life insurance can be a saving grace in such an event. Financial Plan also would earmark 3-6 months of your expenses as an emergency corpus to avoid the immediate impact of sudden change in cashflows. 

Realizing your goals:

Each one of you would have a few goals in mind to be achieved. The financial planning process takes the first step of helping you put your goals on paper. Though it may seem pretty simple, what may need help is to structure the goals and make them more realistic. It then helps you prioritize these. Once you have laid down what is important to you, it then creates a road map to achieve the same. 

Managing your cash flow and investments:

Through the process of financial planning, you can learn to monitor and review your spending over time. This can help you develop a budget to optimize how you use your income. By constructing a diverse investment and savings strategy, financial planning can help you identify the best asset classes to procure that will mitigate risk and help you achieve your goals at the same time. With the multiple options available, it can become extremely complex to manage your corpus efficiently towards your goals. Consulting a qualified and experienced financial advisor will reduce your burden and ensure that you make the best choices suitable to you.

Managing multiple components of your finance:

There are various aspects related to your finances that need to be addressed. Tax planning, Risk profiling, portfolio diversification, asset allocation, debt management, preparing for contingencies, achieving your goals, estate planning are a few to name. When you look at these in isolation, it may impact the other components. Financial Planning helps you address all of these together, understanding the impact (if any) on various other parameters. This is done keeping your broader objective of financial planning intact.  

The importance of financial planning cannot be overlooked. Contrary to what many people think, financial planning is not just for the rich. Working with a certified financial planner or wealth management firm has become extremely affordable and will make all the difference. This can help you avoid making simple mistakes like relying on just your provident fund contributions to make it through retirement or relying solely on your employer-provided insurance coverage. 

So if you haven’t started thinking about your financial plan, don’t wait any longer. In finance, nothing is absolute. While starting sooner is important, starting later will always be better than never considering it at all – and a good plan can, to some extent make up for the delay!