Financial planning is like a road that helps reach the financial destination by the right investment strategy and management. Financial goals can be buying a house, children’s education and marriage expenses, financial security to the family, retirement planning, etc. Experienced financial planners can help you with appropriate action steps and strategies to accomplish your financial goals by considering your present earnings, financial position. He can guide you on where to and how much to invest with diversification and proper asset allocation. He will ensure that your investments are on track with continuous monitoring and reviewing. To reduce the risk of financial losses, he specifies the extent of insurance required for you, including efficient cash flow planning, tax planning, estate planning, etc.
A financial planner should be like a doctor for your finances. He will know each aspect of your financial situation and accordingly provide his unbiased advice and charge you a fee for his services. Unfortunately, people in India hesitant to pay the fee to the professional financial planner. Persons should understand that making their financial plan and making investment decisions is like buying medicine and taking it without a doctor's advice.
Financial Planning Steps:
1. Know your net-worth by looking at your earnings, expenses, savings, and liabilities. You will know by reducing loans from your savings.
2. Then, know disposable income available for investments by reducing expenses from income.
3. Analyze the expenses and reduce them (Also, read our other article, “Why and how to reduce expenses”) by keeping 5-15% additional buffer.
Understand your goals by dividing them into short, medium, and long-term to get direction.
5. Stay focused and disciplined through the investment journey.
6. Chalk out a plan and strategy to accomplish your goals by sticking to it. E.g., short-term goals with liquid funds and long-term with equity up to 80-100% based on the risk appetite, with proper asset allocation and diversification.
7. Include sufficient life and health covers for the protection of the family from adverse situations.
8. Implement the plan, periodically review and rebalance the portfolio.
9. Start with a small amount and gradually step up over a period with an increase in income.
Advantages of proper financial planning:
1. Know your total earnings, financial situation, expenses, dependents, life stage, assets, liabilities, cash flows, risk-taking capacity, financial goals, etc.
2. Plan systematically for various financial goals and objectives like planning for children’s education and marriage, purchasing a car/ house, investment, estate, tax, and retirement planning
3. Provides financial security to the family by including good life and health insurance.
4. Helps to make your financial life secure and better by ensuring all financial goals.
5. It Makes you understand various asset classes and their suitability to you.
6. Implement the plan, review the progress, revise and rebalance to accommodate any significant change in personal life or financial situation.
Most of us will think that we are brilliant in deciding on our finances and can manage. But the fact is it is a vast area that requires professional expertise. We pay even to a barber who cuts our hair but shies away when it comes to financial planners. That shouldn't be the case.
Achieving financial freedom and financial goals can be a reality with an expert financial planner's help and advice.
By Team Wealth ATM
Visit for financial freedom.
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