Why the need for
personal financial planning??
Personal financial planning helps you determine your short & long-term
financial goals. It helps to create a tentative plan to meet those
goals. The first step in developing your personal financial plan is to
meet with a financial advisor.
Ø Income: It's possible
to manage income more effectively through financial planning. Managing income
helps you understand how much money you'll need to pay for annual taxes, other
household monthly expenditures & balance amount as savings.
Ø Cash Flow: Increase cash
flows by carefully monitoring & managing your spending patterns &
expenses. Tax planning, prudent spending & careful budgeting helps you keep
more of your hard earned cash.
Ø Capital: An increase in
cash flow, can lead to an increase in capital. Allowing you to consider
investments to improve your overall financial well-being.
Ø Family Security: Providing for your family's financial security is an important
part of the financial planning process. Having the proper adequate life
insurance coverage (preferably a term policy), medical insurance
& home loan coverage policies etc in place can provide peace of mind
for you & your loved ones. In case of all policies please maintain adequate
files, which is known to spouse or other family members to track in case of any
untoward incidents where these needs to be claimed.
Ø Investment: A proper &
flexible financial plan considers your personal circumstances, objectives &
risk tolerance. It acts as a guide in helping choose the right types of
investments to fit your various needs based on your life cycle, personality
& future goals.
Ø Standard of Living: The savings created from good planning can prove beneficial in
difficult times. You can make sure there is enough investment cover to replace
any lost income should a family bread winner become unable to work.
Ø Financial Understanding: Better financial understanding can be achieved when measurable
financial goals are set, the effects of decisions understood & results
reviewed. Giving you a whole new approach to your budget & improving
control over your financial lifestyle.
Ø Assets: A nice cushion
in the form of assets is desirable e.g. 2nd house, freehold land, gold etc.
Many assets currently come with liabilities attached. It becomes
important to determine the real value of an asset i.e. realizable value of
asset after setting of attached liabilities. Knowledge of settling or cancelling
the liabilities, comes with the understanding of your finances. The overall
process helps build assets that don't become a burden in the future.
Ø Savings: It used to be
called saving for the rainy day. Sudden financial changes can still throw you
off track. It is good to have some investments with high liquidity in bank
under fixed deposits. Liquidity investments should be able to take care for 6
months in case of loss or income. These investments can be utilized in times of
emergency or for educational purposes.
Ø Ongoing Advice: Establishing a relationship with your financial advisor
who you can trust & relate with is critical to achieving your goals.
You should regularly meet your advisor maybe once in 6 months to
assess your current financial position & develop & modify you
financial plan based on your changed needs.
