The Importance of Financial Planning.

Financial planning is a step-by-step approach to meet one’s financial goals. It is part of overall life goals. A financial plan acts as a map for your financial life’s journey. It helps you to be in control of your income, expenses and investments. 

We live in a physical world. The physical world uses money, in its various form, to do transactions. You need to have an adequate amount of money to fulfil your needs, goals and desires. And you need to have the right amount at the right point in time. 

For example, if you want to build up an education fund through investments for your daughter, you need to know the amount needed and grow this amount by the time she goes to college. This is one example financial planning can help. It can be for purchase of house, land or anything at all. 

There are many benefits to financial planning.  

  1. Be prepared for emergencies 
    Creating an emergency fund is the most important part of financial planning.  You must have a fund that is equal to at least 6 to 12 months of your monthly salary. This way, you don’t have to worry about procuring funds in case of a family emergency or a job loss. This emergency fund can help you pay for varied expenses on time. 
  1. Peace of mind. 
    With adequate funds at hand, you can cover your monthly expenses, invest for your future goals and spend a little for yourself and your family, without worry. Financial planning helps you manage your money efficiently and enjoy peace of mind. Financial planning for life goals. 
  1. Enjoy a better standard of living 

A good financial plan will assist you in living a relatively comfortable life. 

  1. Tackling Inflation by 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 fund. 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. Unit trust can be a  suitable option for long term goals. These funds could help the investor  to  accumulate wealth in the long run. 

  1. Retirement planning 
    While meeting your family goals it is a general objective to have a comfortable retired life. If you’re planning a retirement after more than 10 years you should plan to invest from now. Financial planning helps you create adequate fund for retirement when expenses continue but income seems to be slowing down or completely stop. 
  1.  Education 
    Education has become very expensive, across the world. It will keep on rising. 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. You can approach a financial advisor for advice if you are not sure how to proceed further. 

By planning your finances, you plan for the future. You are able to gain visibility into your finances in the future. You have a fair idea of how much money would you have, say ten years down the line. You would be aware of the returns your investments should earn to achieve your goals.