Understanding Financial Planning
Financial planning can sound a bit overwhelming and sometimes it gets tricky as well. A good financial plan ensures that you meet your life goals, you are confident about your finances and you know exactly where you stand financially at any given point of time.
Financial planning is a step-by-step approach to meet one’s life goals. A financial plan acts as a guide as you go through life’s journey. It helps you be in control of your income, expenses and investments such that you can manage your money and achieve your goals.
Financial planning for life goals
- Wealth Creation: The rise in the price of everyday items means that if you want to maintain or increase your current standard of living in the future, you need to create a sufficient corpus of wealth. You may also want to purchase a better car or a new house in the future. All this requires money, and it merely highlights the importance of wealth creation. It is possible to achieve these goals by carefully investing your money in the right avenues. Mutual funds, direct equity & real estate can be a suitable option for long term goals.
- Retirement Planning: Your retirement may be 25 or 30 years in the future. But that does not mean you plan for it when you retire. To enjoy a happy and comfortable retired life, you need to start building your safety net right now. Planning at an early stage in life can help secure your future against financial uncertainties. Also, you invest lesser amounts if you start early and gain from the power of compounding which helps to build a large enough corpus over the 25-30 year period.
- Child’s Education: Education has become very expensive, not only in India but across the world. And in future, this cost is only going to rise. This is why it is necessary to start planning from the moment your child is born. Calculate how much you wish to earn and start investing in long-term investment avenues that can help you achieve this goal.
- Saving Tax: Every year, you are probably paying a substantial amount as tax. But you can now lower your tax outgo legally. The Indian Income Tax Act provides various provisions for people to reduce their tax outgo. By planning your taxes in advance, you can identify the best avenues to invest your money and reduce your taxable income. Mutual funds provide a tax efficient avenue for investing for your life goals.
Benefits of Financial Planning
Increase your savings
standard of living
emergencies
Attain peace of mind
Don't Wait before It's too late
Benjamin Franklin has rightly said, “If you fail to plan, you are planning to fail.” You may have several different financial goals you wish to achieve but to reach them at the right point in life; you need to have a financial plan in place at a very young age.