Benefits of Financial Plan
I have already detailed the need for the individual to have financial plan designed for their family.
Basic requirements of financial plan are-
- Your Finances- Income, asset, and liabilities
- Your Goals– Education, Marriage, Holidays, Buying a house or a car, Retirement life.
- Your Risk Appetite– It is the level of risk you are prepared to accept while investing.
First of all, you may need to understand your own financial position which includes your monthly and yearly cash flows.
Inward cash flows may include salary or business income, rent, income from deposits or dividends.
Outward cash flows may include your expenses that you incur on an average, in a month or year. You may exclude the emergency one-time expenditure or any one-time income for that matter from these calculations. This calculation will help you to identify the net disposable income which you can use for investments. Once this exercise is done, you need to account for your assets and liabilities. Assets include the approximate value of your land and building, gold, any existing financial investments.
It is recommended to exclude the value of your residential house and gold jewelry for the net-worth Calculation though that may sound inappropriate is per accounting rules.
The moment you are prepared with your personal balance sheet, you need to identify your life goals and the price tag to achieve them and arrange them on a priority basis. Also do note down the timeframe in which you wish to accomplish them.
Generally, goals more than five years to be achieved are treated as long-term whereas goals that take less than five years are treated as short-term. Financial Planning helps you to fulfill your life goals and have a comfortable retired life.
Benefits of Financial Planning
- Helps in managing cash flows and reduces unnecessary expenditures;thus enabling balance between income and expenses.
- Helps to boost savings and the creation of wealth.
- Helps to reduce tax liability.
- Helps to maximizes returns from investments.
- Ensures better wealth management to achieve life goals.
- Secures retirement life financially.
- Reviews insurance needs and therefore also ensures that dependents are financially secure in the event of death or disability
- Ensures that a will is made.
