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Chapter 4.4: Who requires financial planning?
Financial planning is about managing your finances to achieve your financial goals in the most optimum manner. It's not about making huge savings or less spending nor does it mean having lots of money for huge making investments. It is about prioritizing your financial goals and achieving them in the most efficient manner to derive maximum utility out of your decisions.
For this reason, almost everyone requires financial planning. As the old adage goes – if one is failing to plan, then they are surely planning to fail. Good and thoughtful investment planning is the cornerstone of an individual's good financial health.
Whoever has financial goals and wants to achieve them in the most efficient manner requires financial planning. You don't have to be mega rich to have a financial plan. Neither do you have to be very old and approaching retirement. It does not matter how much you earn or what your age is. In fact, your financial situation influences almost every aspect of your lives – from the type of house you live in to the type of car you drive, to how many vacations you can take. Regular financial planning can help give you peace of mind.
Let's look at how financial planning differs with people in different life stage:
You are quite likely in your 20s. You may have just gotten a job and it feels like a new-found independence. You finally feel one step closer to success. But, life requires self-generated, goal-oriented action – a plan.
This extends to every area of your life, including financial. The degree of your planning will determine at least in part the degree to which you are successful. And, although a financial plan does not guarantee success, it is necessary for it in the long-term. All too often, people delay planning for the future. They may feel such planning should take a back seat to staying financially afloat in the present.
However, even those living from paycheck to paycheck can benefit from financial planning by creating a budget. A budget can be used to determine what is actually spent each month and find ways to trim or even eliminate unnecessary or out-of-control expenditures.
You have hung up your boots and are planning to retire peacefully. But there is a thought nagging you at the back of your mind – how will you be financially stable without a source of income?
You may have to depend on your kids or relatives. A financial plan could help you get a steady stream of funds to help you through retirement. This could act as a passive source of income..
You may have enjoyed your youth, without a care in the world. But now, you are laden with responsibility – including financial ones. You may have to support your parents, spouse and children and are wondering how to do all of that with your salary income.
Create a financial plan right now. Start immediately. No matter what your income level or what your hopes for the future, you need a solid plan to achieve your goals. Drifting through life without carefully set goals and well-researched methods of achieving them is a recipe for disaster.
To enable your money to offer you more of what you want out of life, start creating a financial plan today.
Planning for your child:
Yes, even children need financial planning. This is usually undertaken by parents. Your child has a long road ahead – college, higher education, university abroad, travel plans and so on.
This is apart from the other wants and needs like the latest gadget or funds for medical emergencies. A proper financial plan can come handy here.
Financial planning can be confused with wealth management. There are a lot of similarities between the two. Yet, there are dissimilarities too. Understand the difference here. Click here
Why Capital gains report?
- Snapshot of profit/loss
- Reflects performance of your portfolio
- Helps compute taxes
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