What is Financial Planning?
Financial Planning is a process whereby one tries to determine his financial status, and set a financial goal and means to achieve the goal set.
As one old saying usually quoted – if you fail to plan, you plan to fail.
Hence, without a proper financial plan, a person will not know his financial needs and wants now and the near future, and without the plan, he will not be focus in his daily financial requirement and may not have the meaning goal to strive for.
Why do we need a financial plan?
We need financial plan to help us in our effort to organize and plan our financial requirement in a more orderly and structured manner.
By having good financing planning, we can work out our objectives, policies, procedures, program and budget our financial activities to ensure we have an effective and adequate financial measures.
The importance can be outlined as-
- It enables us to have adequate funds.
- It helps in ensuring we have a balanced inflow and outflow of funds and thus have a stable cash flow.
- It helps us in ensuring we have growth of funds and in the long run we can have better survival in any financial crisis.
- It ensures that the surplus of funds are easily invested in instruments which generate good returns.
- It reduces any uncertainties with regard to changing market trends which can be faced easily through enough funds.
- It helps in reducing the uncertainties which can be a hindrance to any ventures we want to embark in.
What are the main components of Financial Planning?
- 1. Debt management
- 2. Risk management
- 3. Investment planning
- 4. Tax planning
- 5. Retirement planning
- 6. Estate planning
If we can follow the above six points to work out our financial planning, we do not even need to consult financial planner to devise a plan for us.
Financial planning plays an important role in our daily life and we need to pay serious attention to it, as a good financial planning will help us in a long run, especially in time of crisis.
With good financial planning, we can become more discipline, set our priority and work diligently towards the goals we set.
A good financial planning especially in this COVID-19 pandemic time can help to give protection to us for unexpected illness and loss of income.
We only live once, so we need to make full use of our live now and enjoy ourselves by having a good financial plan.