Financial Planning and its key components
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."
To put it simply, without a proper financial plan, a person will not know his financial needs and wants now and the near future.
Overall, we will be more focus in our daily financial requirement and will have the meaning goal to strive for if we have good financial plan.
Why do we need a financial plan?
To organize and plan our financial requirement in a more orderly and structured manner, ultimately we need financial plan.
By having good financing planning, we can work out our objectives, policies, procedures, program and budget our financial activities, at the same time to ensure we have an effective and adequate financial measures.
The importance can be outlined as-
- It enables us to have adequate funds.
- We have a balanced inflow and outflow of funds and as a result have a stable cash flow.
- 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.
- Eliminates any uncertainties with regard to changing market trends which can be faced easily through enough funds.
- Reduce the uncertainties which can be a hindrance to any ventures we want to embark in.
- Financial planning plays an important role in our daily life and we need to pay serious attention to it.
- Financial planning will help us in a long run, especially in time of crisis.
What are the main components of Financial Planning?
- Debt management
- Risk management
- Investment planning
- Tax planning
- Retirement planning
- Estate planning
All things considered, if we follow the above six points to work out our financial planning, generally speaking, we do not even need to consult financial planner to devise a plan for us.
Benefits of 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 can enjoy financial freedom when we retired and do not have to worry about money.
In short, we only live once, so we need to make full use of our live now and enjoy ourselves by having a good financial plan.