Many people are not aware of financial planning and they spend their entire life just as if there is no need of planning for their future goals.
Financial planning is the process of studying the current financial condition of an individual and estimating the future requirement of funds for his or her goals and preparing a plan in order to achieve those goals.
Why is financial planning required?
Financial planning is required to ensure that the right amount of money is available at the right time to meet financial goals. Financial planning helps to plan for important events in your life like funding children’s higher education, their marriage, funding your dream vacation and most importantly retirement planning. You need to allocate sufficient funds for your retirement as your source income becomes limited during retirement. It helps you to have peace of mind as you have planned for the future requirement of funds without compromising with your standard of living.
Financial planning takes into account inflation. In simple terms inflation is rise in the prices of goods and services and decrease in the value of money. If we consider inflation in United States of America, for last 100 years if in 1920 you purchased an item for $1 then the same item will cost $12.91 in 2020. So it is really important to take into account inflation while estimating funds for future goals.
Financial planning helps an individual realize their aspirations and makes them feel happy and satisfied. Financial planning is normally time bound and specific which helps to allocate more funds for the most important goal.
Who needs financial planning?
Basically everyone requires financial planning. A person doing a 9 to 5 job, a freelancer, a business
owner, whoever he may be requires financial planning, as it is a fact that everyone retires at some
time or the other.
How to do financial planning?
It is advisable to hire a professional financial advisor to do so as he will be studying your finances in an unbiased manner. Financial planner will make plans that are specific, time bound and achievable with correct asset allocation to investment types, along with managing risky investment properly. To conclude nowadays Financial planning is needed to plan for the future funds requirement so that the goals are achieved without compromising on the standard of living of an individual.