Financial Planning is the process of channelising financial resources towards financial goals. Resources include inflow generated through human capital (earning members of the family), financial capital and real capital (investments into equity, debt, real estate, bullion, etc.).
While preparing the plan our focus is on:
WEALTH PROTECTION
This stage deals with protecting wealth, wealth includes both non-material and material wealth. consists of and your near and dear ones.
On the path to achieving goals, there could be instances of job loss, migration, illness, disability, accidents, and death. We need to have a strategy to deal with these eventualities.Though the emotional pain can take long to come to terms with, being at our wits end can be of huge help. In order to mitigate financial stress, structured planning is vital. This kind of backing gives us confidence on a rainy day and prevents us from acting out of fear, impulse or pressure.
Protecting material wealth is also important, This consists of a house, an office, a shop other real estate, a car or other vehicles of transport, jewellery etc. They need to be protected from fire, theft, burglary,cyclone and many other perils.
Lastly, you need to protect yourself from liabilities as well. e.g. If a maid servant gets an electric shock while working in the house then the expenses have to be born by the employer. The employer. becomes liable to pay for her.
All these can erode wealth and hence a wealth protection strategy is the first step in any financial planning process.
WEALTH ACCUMULATION
WEALTH DISTRIBUTION
Wealth Distribution begins with providing for the golden years of life. This is then followed by bequeathing assets to loved ones.
- Dealing with catastrophes, both natural and man-made with equal ease.
- Accumulating Wealth for future financial responsibilities.
- Bestow your wealth to your close kin.
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- You do not possess expertise in certain areas of handling finances. A planner can help you evaluate the level of risk in your investment portfolio or adjust your retirement plan due to changing family circumstances.
- You want a second opinion on the financial plan you have developed, to give you confidence in the viability and expected success of the plan in achieving your goals.
- You don't have time to spare for your own financial planning.
- You have an immediate need or an unexpected event has occurred that requires you to start planning, such as, birth of a child, inheritance or major illness.
- You feel that a professional adviser could help you improve the way in which you currently manage your finances.
- You want or feel the need to improve your current financial situation but don't know where to start.
- You find it difficult to stick to a plan.
- Look at the bigger picture - financial planning is more than just retirement planning or tax planning.
- Don't confuse financial planning with investment planning. Investment planning is just one component of financial planning.
- Direct your life, don't let life direct your actions - Don't wait to be affected by monetary crisis to begin financial planning.
- Financial planning is more about your life than about finances.
How To Make Financial Planning Work For You -
- Set measurable financial goals.
- Understand the effect of each financial decision.
- Re-evaluate your financial situation periodically.
- Be realistic in your expectations.
- Realize that you are in charge.
- Start planning as soon as you can.
