What is Financial Planning ?
Financial planning is the practice of putting together a plan for your future, specifically around how you will manage your finances and prepare for all of the potential costs and issues that may arise. The process involves evaluating your current financial situation, identifying your goals and then developing and implementing relevant recommendations. Altogether there are six steps in financial planning and the last step is the most important one which is monitoring the progress, certain times we miss this and try to go with the flow but proper monitoring and updating in the portfolio is the most important parameter.
Benefits of Financial Planning :
Financial Planning is different for every person as we divide the goals into Core and Satellite goals, now core goals can't be shifted as higher education for children or retirement, but satellite goals which can be buying a car can be postponed for a while. So, everyone has different importance for every goal and we give specific time as per the requirement. So the key points for Financial Planning are. A financial plan involves a thorough examination of your income and spending.
- It can improve your understanding of your financial circumstances at all times.
- It establishes important short- and long-term financial goals.
- It clarifies the actions required of you to achieve your various financial goals.
- A financial plan can focus your attention on important immediate steps, such as reducing debt and building your savings for emergencies.
- It enhances the probability that you’ll achieve financial milestones and overall financial success (however you define it).
- It can guide your efforts over time and provide a means to monitor your progress.
- It can keep you out of financial trouble and reduce the stress and worry you may have experienced in the past.