The Importance of Financial Planning
Table of contents
- What is Financial Planning
- Financial Planning is for whom?
- What is the benefit of Financial Planning
We live in a very unpredictable world. It's almost impossible to correctly predict what will happen the next minute, let alone in five to ten years. The uncertainty inevitably makes people wonder, are they ready for what the future holds? Have they made enough to support their family in challenging times?
What is Financial Planning
Clearly understanding one's future financial requirements and making provisions for them is called Financial Planning. Financial planning is an ongoing process of knowing your current financial standing, understanding where you want to reach, and taking appropriate steps to get there. Like other plans, a financial plan is dynamic in nature and needs to be reviewed from time to time as circumstances in your life change.
You work hard to earn your money, so saving it isn't enough. Investing the saved money into appropriate and suitable investment options is key to securing the financial future you aspire to, for yourself and your family. Everybody has different requirements depending upon their income, expenses, and risk appetite.
A good financial plan takes care of your short term as well as long term financial requirements. It helps in inculcating the habit of saving and adds financial discipline to your finances by controlling your expenses.
"If you buy things you do not need, soon you will have to sell things you need,"- Warren Buffet
Financial Planning is for whom?
There is a myth that financial planning is for people who have surplus money, but the fact is that a good financial plan can benefit everyone. Some people think that financial plans are for the older folks only; this is not true. If you start investing from an early age, you will be way ahead in achieving your life goals than many of your peers. In fact, most millionaires and billionaires got hooked to financial planning at an early age. Investing at the start of your career provides a large cushion for any unforeseen circumstances that might occur later in your life.
What is the benefit of Financial Planning
Without sound financial planning, you can miss out on important life goals. A financial plan is a roadmap for financial goals and reduces uncertainty about the future. A good financial plan increases your quality of life, along with providing you with the following benefits.
- A financial plan reduces anxiety and uncertainty regarding your financial goals.
- It provides you with an increased sense of awareness and control over your financial goals.
- It safeguards your financial future and thereby protects your personal relationships. A sense of security for the family members translates into an enhanced quality of personal relationships with loved ones & family members.
- It lays out a comprehensive roadmap regarding your future obligations, protecting your financial resources by doing so.
- It monitors your spending and expenses and inculcates the habit of maintaining budgets.