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Financial planning includes evaluation of investment and financing
options, in order to make optimal decisions, after analysing the
consequences of the decision. Financial planning is a process
through which an individual can chart a roadmap to meet expected and
unforeseen needs in life. It is a target to measure the progress you
are making and update your plan as your goals and time frame change.
A financial plan is a tool to compare future performance against
that plan. Financial planners play an important role in financial
planning. They help you in identifying, advising and monitoring
appropriate plans for your financial portfolio. You do need to pay a
one-time fee to have a plan created, or it may be included as part
of a fee-based account with a stockbroker or investment adviser.
Need for financial planning:
The basic intention of financial planning is to take necessary steps
to ensure that the individual is well equipped to achieve what he
has desired to achieve and is prepared to deal with unforeseen
events as well. The two factors that are primarily responsible for
financial planning, in the present scenario, are inflation and
changing lifestyles. Hence, the importance of financial planning
cannot be overstated.
Inflation: This is a situation where there is a rise in the general
price level. For example, a product that costs Rs.10 at present
would cost Rs.15 a year from today and Rs.50 over a period of 10
years assuming a price rise at 5% p.a. Financial planning ensures
that one is capable of dealing with the impact of inflation,
especially after retirement, when expenses continue but income dries
up.
Changing lifestyles: It is imperative for individuals to upgrade
their standard of living. Some luxurious objects like cars have
become necessities today. Financial planning has a key role to play
in helping individuals both upgrade and maintain their lifestyle as
well.
Also, there are unexpected events like medical emergencies or
unplanned expenditures that an individual might have to cope with.
Proper financial planning can enable him to easily diminish such
situations, without damaging his finances.
Ideology of financial planning:
Financial planning is not a very difficult task. You need to be
disciplined in order to have a co-ordinated and comprehensive
approach to achieve your personal and reasonable financial goals.
Discipline plays an important role at every stage, from setting
objectives to actually executing the plans that are meant to achieve
those objectives. Some of the ideologies of financial planning are
setting objectives, investing in line with minimum risk and asset
allotment.
Benefits of financial planning:
Financial planning helps you to determine different ways to get
through your financial destination. Financial planning is beneficial
and essential at each and every phase of your life like- a simple
trip to a particular destination, your retirement, or maybe you have
accumulated substantial wealth and want to protect your assets from
lawsuits and many other potential threats not only to yourself but
also to your heirs. Financial planning enables you to have a secured
future..
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