Financial Planning:

Whenever we plan to complete a task, be it routine or something big, we have some tentative action plan on mind.  For e.g, in planning a vacation, you would finalise its period, budget, location, hotel, travel tickets, packing list, trip itinerary and pending tasks to be completed before leaving, etc. This step-by-step action measures would ensure that you completely enjoy your break as an organized traveler who knew the destination well & have planned everything in advance.

This analogy can be applied to our financial lives too. Financial Planning provides a blueprint – an outline for your financial wellbeing and eventually to achieve financial security in life.  A financial plan would prepare you to have sufficient funds arranged to meet your financial goals in life well in advance. It would also financially prepare you to face any untoward situation that life throws at you.

What is NOT financial planning?

Many people are not aware of the comprehensive concept of financial planning.  Financial planning is

  • Not a recommendation to purchase a particular financial product like mutual fund, insurance,etc.
  • Not a portfolio management/investment advisory /wealth management service
  • Not a one-time process

What is Financial Planning?

Why is Financial Planning important for you?

  • Creates a broad vision: As mentioned above, the scope of activities in financial planning is very comprehensive. It will help you structure your thought process towards a bigger picture, a bigger vision keeping in mind all areas of personal finance.
  •  Take any decision in totality: Any financial decision taken affects other areas of personal finance. For instance, the ad hoc tax saving which most people do in the guise of tax planning at the nth hour does affect their long term resource allocation & investment goals. Financial Planning helps to take decisions in an integrated manner where decision taken for one aspect is not at the cost of other financial goals.
  • Comfortably adapt to any major transition in life: There are different life stages that an individual goes through, right from early working age, getting married, having children and then finally retirement. During each of these stages, an individual’s financial priorities change. For instance, an individual in his early working age has the least financial responsibilities and more propensity to save. On the other hand, an individual in his 40s has relatively more financial responsibilities with more dependants in the family. Financial Planning enables an individual to easily adapt to any transition in life stage.
  • Periodic review instills discipline & focus: Financial Planning is a dynamic process, an ever evolving action plan as the financial situation of any individual does not remain constant. It thus instills discipline & focus ensuring that your financial life & goals remain on track. Financial Planning thus facilitates to gradually bridge the gap between funds on hand & funds required eventually putting one on the road towards financial liberty.