What is Financial Planning - Importance & Benefits of Financial Planning

Essentially, financial planning provides a framework within which you can achieve your goals in a systematic and planned manner, avoiding surprises and shocks. As well as determining capital requirements, structuring financial policies, and ensuring that scarce financial resources are used effectively, it can also serve many other purposes. Les know about What is Financial Planning – Importance & Benefits of Financial Planning.

What is Financial Planning – Importance & Benefits of Financial Planning

Adults need to be taught how to plan their finances. Having said that, when individuals volunteer to plan their finances, they are unsure of where to start. Listed below are the 10 golden rules you need to follow to plan your finances well.

Table of Contents

What is financial planning?

Financial planning provides a step-by-step approach if you want to achieve your goals. When you walk through life’s journey, a financial plan acts as a guide. In short, it increases your control over your income, expenses, and investments so that you can better manage your money and achieve your financial goals.

If you closely examine all the examples above, you’ll find that they share one common factor: money. For your goals and desires to come true, you need a steady income stream. You also need the right amount of money at the right time.

For example, if you want to accumulate a corpus of Rs. 10 lakh to pay for your daughter’s college education through investments, you should grow that amount by turning 18. If not, she will lack the resources to pay for college. Proper financial planning is imperative in this case.

What are the Benefits of financial planning?

Taking the time to prepare for the future has many advantages. It allows you to:

Increase your savings

Savings, if you need to do so, avoid debt. However, it may not be the most efficient method to use. Developing a financial plan gives you valuable insight into your income and expenses. With this information, you can reduce costs in conscious ways. Ultimately, you’ll save more.

Enjoy a better standard of living

People tend to mistakenly assume that paying off their monthly bills and EMI repayments would negatively impact their standard of living. Rather, if you have a solid financial plan, you would not have to compromise your lifestyle. If you achieve your financial goals comfortably, you will live the lifestyle you want.

Be prepared for emergencies

Emergencies: an emergency fund is a critical part of financial planning. You must have a contingency fund for at least 6 months of your monthly salary. So, any family emergency or job loss won’t cause you to worry about finding funds. This fund will help keep you from running into financial trouble at any time.

Also Read: Top 10 Highest Paying Jobs in India in 2022

Attain peace of mind

A healthy budget lets you cover your monthly expenses, invest for the future and splurge a little on yourself and your family without having to worry about money. Financial planning will give you peace of mind and help you manage your finances effectively. If you are not yet at that stage, don’t worry. The path to financial peace is not very far away if you are on the road to financial planning.

A financial plan for achieving life goals

Financial planning must play a significant role in Indian personal finance. The idea is to not just increase your savings and reduce your expenses. Financial planning involves much more than saving and reducing. Among the many things you could work towards are:

Increasing your wealth

Since the prices of everyday items are on the rise, you need to create sufficient wealth to maintain or increase your living standard in the future. Perhaps you will also consider buying a better car or a new house in the future. As you can see, it is not possible to create wealth without money. By carefully investing your money in the right avenues, you can accomplish these goals. Stock mutual funds are a suitable choice for long-term goals. Investors can accumulate wealth when they invest in these funds over time.

Saving for retirement is important

Retirement could be 25 or 30 years away from now. However, that does not mean you plan for it when you retire. Creating a safety net now is the first step toward a happy and fulfilling retirement. When you plan your future at an early stage, you can protect yourself from financial uncertainty. Moreover, you invest lesser amounts if you start early and gain from compound interest, which helps you accumulate a much larger corpus over 25-30 years.

financial plan for Child’s education

Educating the next generation is becoming more and more expensive, not just in India but around the world. And the price of the education will continue to climb in the future. That is why it is imperative to start planning as soon as your child is born. Invest in long-term investment avenues that can help you achieve your investment goals. Calculate how much income you want to earn and invest accordingly. When in doubt, you may want to consider seeking the advice of a financial advisor.

financial plan for Saving tax

If you are like most people, you pay a substantial amount as tax every year. However, now there are legal ways to cut your tax bill. People can reduce their tax responsibilities under the Indian Income Tax Act via various provisions. By planning your taxes, you can determine the best places to invest your money and reduce your income tax. Investing in mutual funds offers an effective way to achieve an investment goal without paying taxes.

Conclusion

There is nothing that can predict the future. In either case, a sound financial plan will help you and your family tide over the rough patches. If you have a financial plan is like organizing your trip to reach your goals safely. This blog post aimed to emphasize the importance of financial planning.

Explanations of how to go about planning your finances are provided here as well. Having financial plan on paper can not help you if you don’t act upon it. The earlier you begin to plan your finances, the less complicated it will be to achieve your financial goals and the higher your chances will be. But why don’t you start now?

FAQs

Q1. What is the importance of financial planning?

Ans. Financial planning provides a step-by-step approach if you want to achieve your goals.

Q2. What are some specific benefits of financial planning?

Ans. Financial planning must play a significant role in Indian personal finance. The idea is to not just increase your savings and reduce your expenses.

Q3. What are the benefits of financial planning for a business?

Ans. The benefits of financial planning for business gives you valuable insight into your income and expenses of you business. With this information of financial plan, you can reduce costs in conscious ways. Ultimately, you’ll save more.

Q4. What is the most important part of financial planning?

Ans. The most important part of a financial planning is to achieve your life goals.