With the coming of the second wave of covid 19 most of the friends of Rahul were spending sleepless nights thinking about how to meet up with the demands of the upcoming days with their jobs being in question and without any savings.

Rahul on the other hand was confident with his financial situation since he had started planning long ago for such an inevitable emergency.

Flashback :

After getting his first job Rahul was very excited about fulfilling all his desires. Freshly out of college he wanted to grab everything from his first salary. He went to his father asking about what he should buy first from his very first earning. His father asked him to start with FINANCIAL PLANNING. This advice was life changing for him. Today his father might not be present but his advice had saved him from the sleepless nights and an uncertain future.

WHAT IS FINANCIAL PLANNING?

Financial planning is the process which provides us with a framework for achieving our life goals in a systematic and planned way by avoiding shocks and surprises. It is a process with objectives such as determining capital, comparing financial policies and ensuring that the scarce financial resources are utilized the best way.

Example: If someone wants to save rupees 1 crore by the end of his/her job tenure then she or he should start planning, and investing in any financial device for attaining his or her goal. The planning requires patience since it is a long process but the fruit of this patience is not only sweet but sometimes life saving as well.

WHAT ARE THE BENEFITS OF FINANCIAL PLANNING?

1.  INCOME MANAGEMENT:

• Helps in managing money in best way possible.
• Developing a strategy that will assist one in calculating the number of resources needed for monthly spending.
• It can help one figure out how much money one needs for taxes and how much money to save from a specified amount.

2.  IMPROVED CASH FLOW:

• Income growth leads to an increase in earnings.
• It is essential for day to day operations of ones professional and private life where one must meet a variety of commitments as they arise.
• Expenditure prioritization can greatly assist one to keep track of ones capital, reducing overhead cost and ultimately increase overall capital.

3. FOR BETTER INVESTMENT :

• Smart financial plan considers ones specific situation, risk tolerance and long term goals.
• It helps in making best financial decisions based on ones needs.

• Financial planning aids in creation and planning of financial resources for future.

4.    INFLATION SECURED:

• Inflation has been called the worst killer of purchasing power. Over the previous few decades the value of money has decreased immensely with an uncertain future.
  • It is essential to organize our finances for a brighter and secure future. With careful financial preparation, we will be better prepared with the growing inflation in the coming years.
• GUARDED RETIREMENT PLAN :
• If one plans to retire early, one should start investing as soon as possible.
• When bills remain but income dries up, proper financial planning aids one in building adequate base for retirement. It’s usually good idea to start investing early to achieve one’s goals.
  

MYTH #1: I DON’T NEED A FINANCIAL PLAN

TRUTH: To reach any goal one needs to plan. The concept of going with the flow incase of financial planning itself is a myth. Having a financial plan is not an option anymore, it’s a must. Without a proper plan, navigating one’s finances is

tiresome. Thus, a plan can simplify things by keeping track and help one to understand the next required step.

MYTH #2: A BUDGET IS A FINANCIAL PLAN

TRUTH: A financial plan is more than a budget, although spending and savings play a major role in financial planning. A budget is specifically designed to track ones spending and savings habits, helping one to become more efficient with one’s personal cash flow.

A financial plan on other hand encompasses all the areas of one’s financial life. From savings, to insurance, investment, retirement. The plan will pave the path to help with tough financial decisions and give one insight on how one can manage each area with confidence.

MYTH #3: I CAN DO IT ALL ON MY OWN

TRUTH: It is quite impossible to handle everything on your own. While there a lot of things one can and should take into your own hands, it would be unwise to think that everything can be handled by you when it comes to your personal finances. At some level you will require some level of intervention and support from additional tools, services, and financial professionals.

Authored by : Anju Mitra