What is Financial Planning?
Financial planning refers to the process of streamlining the income, expenses, assets and liabilities of the household to take care of both current and future need for funds
Why Financial Planning is needed?
| As the earning member/members has the person made provisions for taking care of one’s expenses if the respective person’s current income is interrupted for any reason? |
| b) Does the person have adequate insurance cover which will take care of one’s family’s requirements in the event of his/her untimely demise? |
| c) What are one’s specific future expenses and how will one fund them? |
| d) If one has to create a corpus to fund large expenses in the future, what is the size of the investment corpus one should build? |
| e) Given the person’s current income and expenses is the respective person saving enough to create the corpus required? |
| f) Will one have to cut back on current expense or can one increase one’s current income so that expenses in the present and the savings for the future are met? |
| g) What is the wealth the individual has so far build from savings and how can one best use it to meet one’s needs? |
| h) How should one’s saving be deployed? What kinds of investments are suitable for the individual to build the required corpus? |
| i) How much of risk is one willing and able to take with one’s investments? How would those risks be managed? |
| j) How should one ensure that one’s savings and investments are aligned to changes in one’s income, expenses, future needs? |
Financial planning is thus a process that enables better management of the personal financial situation of a household. It works primarily through the identification of key goals and putting in place an action plan to realign the finances to meet those goals. It is a holistic approach that considers the existing financial position, evaluates the future needs, puts a process to fund the needs and reviews the progress.
Source— Various articles on personal financial planning
