5 Components of Financial Planning
From Budgeting to Retirement Planning
Chances of succeeding at anything become significantly higher in life when planned well. We know this in our education, careers, even relationships. However, when it comes to money, we seldom plan as well and thus suffer in our financial performance. You may have found it difficult to begin, and hence avoided financial planning, now you will see, that it is quite easy to begin and as we know, a job well begun is half done.
Before you dive into the aspects of Financial Planning you should know your current financial position. Understanding your current financial position will give you a clear picture of your goals and objectives and the resources you hold to achieve them. It helps you by implementing a strategy to use these resources efficiently to achieve your financial goals.
Budgeting
Investing
Life Insurance Assessment
Retirement Planning
Estate Planning
Analyzing your current financial position is very simple. You must be wondering how? All you need to look at is the Income-to-Expenditure ratio. If your income is low and your expenditure is high, then you are in debt. If your income is higher and your expenditure is low then your financial position is in the saving mode. Now that you have determined your financial position let us understand the aspects.
1.Budgeting: It is the blueprint of your spending plan. It gives you a clear picture of your cash flow and the expenses you can incur. Simply stating it is balancing your expenses with your income. Include this aspect to stay away from debt and unnecessary expenditure.
2.Investing: There are several instruments you can invest in, which offer you great opportunities to diversify your investment portfolio and increase your assets. Depending on your Risk Appetite you can invest in various investment options available. If your risk appetite is high, invest in Equity Fund or if you are looking for a safe and secure investment option you can invest in SIP, Fixed deposit and insurance plans. It is always important to invest money smartly if you want to achieve a financial goal before your retirement plan. There are many options available in the market choosing the right fit for your goals may get difficult. A financial advisor will guide you through all such options and help you select the best fit for your long-term goals. So, include this aspect in the financial planning aspects if you want to make your money work for you
3.Life Insurance Assessment: It is that aspect which you may not consider as important as the others but it may affect your planning in many ways. Prevention is better than cure and when it is about Life Insurance it is better having it than regretting not to have one. What if you are not there around to look after your family someday? Who will support them in times of crisis? Providing security to your family is an important part of financial planning.
Getting a life insurance plan when you are with them is the best way to provide security to your family. After the maturity of the insurance, the amount they will get will be utilized in various things like children’s education fees, daughter marriage, medical and other household chores.
4.Retirement Planning: We all want a retirement worry-free and comfortable. While meeting your family goals, it is a general objective to have a comfortable retired life. While planning for your investment, start early. The power of compounding works magic if you keep investing for the long term. For worry-free and comfortable retirement start investing before your income starts drying up. Plan today, for a better tomorrow.
5.Estate planning: Investing your money from now will make it easier to achieve such long term goals. It is a process of accumulating wealth over a lifetime. This planning will not only help you to reduce your liabilities but increase the value of assets over time.
As Allen Lakein says ‘Failing to plan is planning to fail’. Looking at the current times and future expected changes, one should be actively planning finances. Improving the standard of living and fulfilling future needs depends on the plans you make today. So what’s your plan for the future? Have you considered these aspects that may shake your financial plans?
