Managing funds in the present times has become the most challenging task. Since the markets are unpredictable, people nowadays require effective strategies to manage their funds and help build a road map for their economic well being. This is why financial planning is gaining a lot of recognition and importance. Financial planning is a step-by-step strategy that helps you reach all your set goals in life and for that you need a solid financial plan. A financial plan further serves as a guide in your life journey as it assists you in controlling your expenses, income, and investments.
Principal Purposes of Financial Planning and Control
Financial literacy is significant for investors and individuals who want to control and manage their funds accurately. Financial planning usually comprises all the activities related to budgeting, investing, spending, tax planning and copious more. Mentioned here are some of the primary purposes of financial planning.
1. Helps achieve long-term goals
Some milestones are pretty essential in every person's life. Be it owning a family car, an individual house, saving for your kids' higher education or their marriage. It becomes your obligation to fulfil these requirements and set milestones.
Financial planning and control can also help create a strait-laced financial strategy to suffice your economic purposes in a definite period. Hence, it becomes imperative for every person to control their expenses and perform financial planning to meet your set long-term goals.
It is likewise crucial that you plan all your goals early by investing in appropriate investment plans offered by banks. Investing funds early will always make it more comfortable to accomplish these long term goals and gain higher returns on your investments.
2. Provides hedge against inflation
Inflation today can be regarded as the most prominent killer of your purchasing capability. Inflation usually occurs when the demand for a product is more than its supply, and due to this increased demand, the prices also increase.
The biggest reason why every person must opt for financial planning is that it provides a hedge against inflation, especially during current times when the purchasing power of people is increasing and the market constantly keeps on fluctuating. This financial planning will always ensure that you bear the rising inflation while preserving your determinations unaltered.
3. Presents financial security against emergencies
When it comes to financial planning, preparing in advance is always better than regretting later in life. There can be unforeseen times in a person's life, such as a medical emergency that can drain all your finances in no time. It might leave you wondering why you did not plan for such emergencies beforehand.
Creating a financial plan and setting aside some funds for contingencies will always ensure that you and your loved ones always remain guarded against all sorts of emergencies.
Three Steps for Effective Financial Planning
With proper financial planning and control over your funds, you can get better clarity in life and enhanced peace of mind. Listed below are some steps you can follow for effective financial planning.
1. Define your financial objectives
This is the initial step you must follow for creating an effective financial plan. Defining your long and short term financial objectives, quantifying and differentiating them based on needs and wants will present you with a better understanding of your funds and keep you financially protected against market changes.
2. Analysing your financial position
To create an effective savings plan, always analyse your solvency, debt and liquidity ratio. This analysis of your financial position will help you measure your risk appetite and create the best financial plan according to your income and expenditure.
3. Implementation of a financial plan
Once you create a financial plan, the next step you must follow is to implement and follow this plan religiously. Also, you must ensure to make necessary changes according to the market fluctuations to have better control over your funds.
Saving Schemes for a Better Financial Planning
If you are keen on financial planning and money control and looking for suitable investment options to save funds for the future, below are some of the top saving schemes you can choose for making a protected investment.
1. FD (Fixed Deposits)
All those looking for a secured financial instrument for investing their money can readily opt for a fixed deposit scheme. You can easily open an FD account with any leading bank or financial institution of your choice and deposit your funds for a set duration. Once the term of your fixed deposit gets completed, you will get a lump sum amount along with interest.
Learn what is a fixed deposit and what are the benefits of including it in your investment plan.
2. PPF (Public Provident Fund)
PPF (Public provident fund) is another great investment alternative that has been remarkably successful across ages. The main reason why PPF is deemed a favoured selection is that it is an investment scheme initiated by the Indian Government and hence regarded as safe.
Apart from this, the interest rate on a PPF is around 8 per cent per annum, and the invested sum is exempted from tax under Section 80C of the Indian Income Tax Act, 1961. Not just this, but the interest collected on the PPF invested sum is additionally exempted from income tax.
The lock-in period for which a person can invest their funds in a Public Provident Fund (PPF) is around 15 Years, and once the set period of this scheme is completed, a person is allowed to withdraw their corpus. Apart from this, the investor also holds an option of retaining the scheme active by prolonging its duration by 5 years or any period according to their needs and specifications.
Having the correct perspective to comprehend financial knowledge and administering that knowledge guarantees that your economic future is picture-perfect. If you are looking forward to investing your funds in a savings plan, then you can choose from a wide assortment provided by Canara HSBC for attaining all your set financial goals.
Click to use : Power of Compounding Calculator