Planning plays an important role in the life of human beings and when it comes to money, financial planning needs to be proper and accurate to fulfill your future needs. The purpose of financial planning is to make sure that when you’re working for your money; your money is also working for you.
Most people aware of their financial needs but not with the process of how to achieve it and here the financial planning plays a vital role. In simple words, financial planning is a process to understand how much you need to earn, save and spend to achieve a particular financial goal. In the absence of financial planning, any adverse or emergency can put you in big trouble.
Financial Planning is a six-step process and accuracy with detailing at every step leads to perfect planning
Many times people think that financial planning is only for a very rich person and not for them, but in today’s scenario, it must for every class of society. Nowadays, expert and trained financial advisers use to provide this kind of service at affordable rates and also help you choose investments, and many manage your investments for you. The importance of financial planning for better tomorrow can be understood with the help of below mentioned 6 key reasons.
Protection from Inflation
Inflation is the major destroyer of the purchasing power of money and due to inflation; improper planned financial goals may end without accomplishment. For example, if you plan for your children’s education after 10 years based on current cost without considering the inflation, the result will be nil. Financial planning aims to ensure that you sustain inflation while keeping your goals unaffected.
Long and short term Goal Planning
Financial planning helps you to achieve important milestones in your life like your children’s’ education, your own house, family car or your children’s’ marriage, etc with ease. It is always better to start early to meet your financial goals at a specific time. Early planning may also help you to earn high returns.
Emergencies like an accident in the family, death of earning member, etc. create a financial burden on the family. An emergency leads to sudden outflow of the money which may exhaust our entire savings or may create new borrowing also. Financial planning takes emergencies also in consideration and makes you ready for such situations without affecting primary objectives.
Retirement planning is one of the most important aspects of financial planning which prepares you financially after retirement to maintain the same or better standard of living. It takes into consideration different aspects after retirement like medical expenses, traveling expenses (planned trip), and any dream goal after retirement for planning purposes. It’s our choice that after retirement we want to be dependent on others or want to live life on own conditions and living on own conditions requires proper planning at the early stage of life.
The purpose of insurance planning is to transfer the risk of several unexpected expenses to the insurance company with a small premium. Life insurance products used to cover the temporary loss of income from disabilities or permanent loss of income from death. Health and accident insurance used to protect the sudden outflow of cash. The type of insurance needed depends upon a person’s assets and ability to create assets.
Tax & estates planning
Estate planning is an act during a person’s life for transfer of his or her wealth and assets to heirs, charity, and other identified beneficiaries after his or her death. It must be written, signed, and notarized by the person who owns the estate for a smooth transfer.
The purpose of tax planning is to ensure tax efficiency and reduction of tax liability as per the financial situation to get the maximum benefit as per IT rules.
It clear from the above explanation that if financial planning is important for different stages of life cycles as per need and if you want to live your financial life without stress and hassle-free, Financial Planning is the only key for that.
” Financial Planning is Important for top Investments and secure your future”