What is Financial Planning

Financial planning is the process of meeting life’s goals through proper management of one’s finances. Life goals could include buying a home, saving for your children’s education or planning for retirement.

Benefits of Financial Planning

     Financial planning helps in taking control of your finances. It assists you in curbing short-term temptations in favour of more important long-term goals. Financial planning provides the following benefits:

• Seeing the future with a clear vision
• Ensuring discipline
• Giving you a direction
• Improving your financial decision making
• Assessing your risk tolerance and develop an asset allocation strategy
• Helping you reduce your taxes
• Safeguarding you and your family against financial crises in the event of death or disability
• Planning for retirement or children’s education and marriage expenses
• Tracking investment performance with respect to set goals
• Providing peace of mind

THE FINANCIAL PLANNING PROCESS

Financial Planners over the world, use a six step process that helps them to see the “big picture” and determine where the person stands  financially.

Can you be Your Own Financial Planner?

Yes, However, it is important to take control of certain situations before you begin, generally, an individual avoids doing structured planning due to the following reasons:

The tendency to procrastinate

Some of the most common excuses are-“I don’t have time.” “I have other things to do.”There are no clear dead-lines for do-it-yourself plans.

The tendency to live beyond one’s means

Money spent today cannot be invested to achieve tomorrow’s goals. Sacrificing instant wants to achieve future needs is a tough task when done without guidance.

The lack of financial knowledge

Most individuals don’t know how to draft financial objectives and evaluate the available strategies.

They also make some common mistakes like:

· Confusing financial planning with investing.

· Investing only for the purpose of tax saving.

· Neglecting periodical review of the financial situation.

· Delaying the accumulation period.

· Setting unrealistic goals.

· Looking for quick-fix financial solutions instead of a long-term strategy.

· Making too tight an investment commitment to fulfill.

· Expecting unrealistic returns on investments.

· Not giving sufficient importance to insurance.

If you can overcome these obstacles, you can surely do your own financial planning. The above concerns are not to discourage you but to give you a sense of what may come in your way to achieve financial freedom on your own.