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What Is Financial Planning?

Planning your finances (expenditure and savings) in order to achieve particular financial goals is called financial planning. If you want your money to work as hard as you do, it is essential that it is invested in avenues that offer you returns in-line with your expectations so that you can successfully meet the goals you have set for yourself.

Steps in Financial Planning

Financial Planning involves several steps, including assessing current finances, budgeting, saving, investing and risk management.

It is a process of allocating your income to various types of expenses and save some income for short-term and long-term emergencies. Financial planning helps in creating a roadmap to guide you towards your future with the help of your current finances. It also aids in protection against the unexpected, by helping one to prepare for things such as unexpected illness or loss of income.

Financial Planning is a critical exercise in ensuring long-term financial security.

How to Get Started?

Steps to effective financial planning

  • Analyze your income, expenditure, and savings - Gathering data about your income, expenses, assets, liabilities and protection plans
  • Analyze your future financial needs and goals
  • These figures are then adjusted as per the expected rate of inflation
  • Identify savings and investment options that will meet your requirements
  • Work out an investment plan to identify investing avenues, saving options and investment budget with timelines and expected returns
  • Implement the plan with specific timelines and performance measures
  • Allocate resources for specific goals

It is also extremely important to regularly monitor the same and tweak the same for modifications in the goals or deviations in performance of the selected investments.

What Is the Best Time to Start Financial Planning?

The sooner one starts financial planning the better. It is best to start planning early in your career and build wealth systematically. When you are young, the liabilities are less compared to your savings; hence money has a lot of time to grow.

How to do Financial Planning?

One should ideally seek the services of a certified and experienced financial planner to take them through the steps discussed and help identify the right investment avenues. A financial planner draws up a plan for your goals and suggests a comprehensive plan for achieving those - it can include a combination of mutual funds, shares, insurance, land, bullion, etc.

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