Financial Planning

The current market scenario is very much volatile due to change in technology, economy, inflation and increasing disposable income. Hence it is required for everyone to do financial planning. So, I thought it's right time to write on - What is Financial Planning.

What Is Financial Planning

Financial Planning is the process of meeting your life dreams/goals through the proper management of your finance.

Financial planning is an ONGOING PROCESS to help you make logical decisions about money that can help you to achieve your goals. The first thing is that it is a PROCESS and not a product. It is a long term method of wisely managing your finances. Hence it is a ONGOING process and not a one-time exercise.

In technical terms, Financial Planning is the process of estimating the capital required for your goals and determining it's current & future competitions.

What is financial planning

There are two ways you can deal with finance in your life:

1 Without Planning wherein at some point of time in future, you will have money and then you will decide how to use that for your goals.

2 With planning, you decide well in advance what are your goals and how you will achieve them.

Financial Planning Gives you more clarity in life, it provides direction and meaning to your financial decision. It helps you to provide the right balance between your present and future lifestyle. It combines the elements of risk management, investment planning, tax planning and retirement planning to comprehensively plan for your future needs. It is a long term process of wisely managing your finances so that you can achieve your dreams, while at the same time mitigating the financial challenges that arise in your lifetime.

Objectives of Financial Planning

The main objectives of financial planning are: 

1. Determine own current financial status. Calculate your own net-worth, yearly average saving and spending, quality of current investment etc.

2. To ascertain the amount of fixed capital required in a given period of time. This is to determine how much money I need for my future financial goals. And also to determine the amount to be raised through various sources using a judicious debt-equity mix.

The process of the financial planning are shown in below image. I will publish a detail post on that.

Financial planning process
In final words, we understand that
  1. Financial Planning is an Ongoing Process,
  2. It’s about Your Life Goals and,
  3. It’s about disciplined arrangement of your personal finances  

“Our goals can only be reached through a vehicle of a plan in which we must fervently believe, and upon which we must vigorously act. There is no other route to success.”Pablo Picasso

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