Financial planning plays a very important and crucial role in our life. Financial planning can be described as ``Long term process of wisely managing your finances so that you can achieve your financial goals & dreams.``
We all see many dreams for our children`s for their higher education, marriage and their future prospects and also set many goals for us, like buying a dream house, new car, vacation abroad. We surely know our goals and dreams but never make serious attempt to fulfill the same. In reality all our goals and dreams remain on paper only.
Financial planning can solve our many problems in life. Generally it is seen that when time comes for any function or occasion people redeem their money from such investment which was planned for some other purpose. Actually we become helpless when some emergency comes and take some instant decision which can definitely spoil our financial planning. Today it is the need of the hour because of the fact that, we are moving from joint family to nuclear family. Secondly, household, education and other personal expenses are going up every day. The loans and credit cards are becoming more and more common and we don`t understand the impact of interest which is taking away major part of our income.
Financial planning brings discipline in our saving and investment. It helps us to know which of our financial need is immediate, short term or long term. We can easily reach to our destination safely and timely if we set some basic rules for our life and invest accordingly. Most of us are not aware of priorities in our life. We all invest but without understanding our financial goals, risk involved and time horizon. The lack of proper financial planning will add to the problems rather solving it. Life insurance, health insurance and disability insurance are the basic of financial planning. In India today also less than 10% are insured and even those who are insured are also underinsured.
Living short is always a major problem for the family but nowadays living long is also becoming more and more problematic. The average life of an Indian is 63 years at present and is increasing because of the advancement of science and technology. Retirement planning and estate planning will also form part of our financial planning which is also been not addressed by many. Less than 1% prepares their WILL and this leads to litigations in court of law for the years. We have to think very seriously for all this aspects in our life if we want to live happily.
There is other side of every investment which a common man does not understand like, economic growth, equity as asset class, inflation, tax implications and asset allocation. Today we are surrounded by many agents/advisors who come to SELL the particular product such as life insurance, mutual funds, PPF, NSC, postal schemes, FDs and direct trading account. The most of the sells happens without understanding the needs of the clients. We all buy one or other product which may or may not fulfill our desired financial goal. No product is good or bad but more important is, it should match with our financial expectations. Financial planning is the process where product comes after the need analysis. This is the recent trend in India, where in planner charges fees for making the financial plan and does not push the product to earn the commission.
Proper financial planning is the only solution which can help us in fulfilling our financial dream & goals.
This entire process is done in following six steps:
> Establishing relationship with client
> Gathering client data and determining goals
> Analyze clients` objectives, needs and financial situations
> Presenting the financial plan
> Implementing the financial plan
> Monitoring and reviewing financial plan
We mostly plan everything in our life, so why not finances?
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