Financial planning is the process of establishing a foundation for financial policies, investments, and administration of funds so that you can keep a track of your finances. A financial plan is very important for any individual. It helps you make your financial condition better, plan long-term financial goals, and use the necessary tactics to achieve those goals. The list of reasons you need a financial plan is endless. A financial plan can be prepared on your own or with the assistance of a financial planner. But why is financial planning so important? Let's find out!
Importance of Financial Planning
Financial planning helps you determine the amount of income that you are receiving and the number of expenses that it is going into. It mainly allows you to control the flow of money to achieve your long-term goals and effectively use the available resources.
Apart from that, financial planning also helps you determine your short-term goals. It serves as a bridge between your short-term and long-term goals to make the best out of it by balancing them both.
4 Benefits of Financial Planning
Financial planning is a roadmap for your wealth, the strategies you have to accomplish your financial goals. This comprehensive picture of your finances helps you stay aligned on your path to achieve all the milestones that you have set for yourself.
1. Increased savings
A financial plan will allow you to get insights and understand how much money is being saved and how to save it better. It increases one's savings as you know exactly how much money is going into what. A financial plan can help analyze cash flow easier than any other method.
2. Better living
A financial plan helps you prioritize your investments and expenditures. Prioritizing these expenses and understanding how to balance them can help you with having a better life in the future. A person who does not have a financial plan can end up in situations where he is clueless about balancing his income and expenses. Do not confuse investment portfolio management with financial planning.
3. Emergency preparedness
Emergencies come with no hints. A financial plan can help you deal with emergencies. An emergency fund can be created of at least money amounting to at least a salary of 6 months. An emergency fund can help you through unexpected situations.
4. Peace of mind
A financial plan automatically gives you peace of mind. With the right plan, you can manage your monthly expenses, make investments for future goals, and use your money efficiently. All these factors can let you stay calm at all times.
Planning your Finances with the Best Life Insurance Plan
By now you must have understood what role does financial planning play in our lives. Buying the best life insurance plan provides you financial security along with protection, wealth creation and investment avenues. Let us understand how a life insurance plan is an important element of your financial planning.
1. Retirement planning
Retirement may be far away, but there is no harm in planning for it now. A retirement plan can help you avoid any financial uncertainties in the future. A good retirement plan can be helpful to make better decisions in the present.
A retirement plan can also allow you to make proper investments. It allows you to balance your present and future decisions. Buy the best retirement plan that offers you to grow your wealth along with providing you with a life cover to stay protected. Canara HSBC Oriental Bank of Commerce Life Insurance Guaranteed Income4Life plan provides guaranteed income that will help you meet your post-retirement expenses.
2. Child's education
A financial plan can help you determine all the expenses that your child might need. It will help you to better organize your expenditures, savings, and investments. Education costs have hiked over the past few years and will continue to do so. Investing in the right child insurance plan will help you build a significant corpus that you can use for your child’s higher education.
A financial plan can help you avoid tough situations in the future. Planning your child's education early can help overcome these situations.
A lot of tax is probably being deducted from your salary. The Income Tax Department of India provides various tax exemption schemes to help reduce these taxes. Life insurance plans can save your salary from income tax. The death benefits that a nominee receives when the policyholder passes away are tax exempted. Also, the premiums that you pay for your life insurance plan are tax-free.
Also Read : Income Tax Slab
5 Tips for a Successful Financial Plan
Only having a financial plan will not help you reach your goals. Tracking your goals and staying on the right path is equally important. Here are 5 super tips to help you devise a successful financial plan:
1. Asses your current financial situation
The first step in creating the best financial plan is determining your current financial situation. Analyze the factors such as income, expenses, debt, and investments. These can help you determine what to do next.
2. Set up your financial goals
Financial goals play an important role in determining and differentiating between short-term and long-term goals. Every goal is equally important. Make this task easier by writing them down on a piece of paper, so you don't miss out on any.
3. Choose the best investment plans
A financial plan can allow you to make better investments. When you understand your cash flow, it becomes easier to segregate the right amount of expenses for investments that can help you reach your goals. Good investments can serve as assets in the future. Equity funds such as retirement plans and a child's education are some of the best options to be considered.
4. Pick the right life insurance plan
The right life insurance plan that best suits your goals and expectations is crucial. Pick the best option amongst the available ones. Consider all the necessary factors such as age, investments, goals, and risks. A financial planner can help your estimate and analyze the right life insurance plan for you. Apart from that, they can also guide you through retirement plans, taxes, insurances, and a lot more.
Find out the best life insurance plans for senior citizens.
Staying committed to a plan you've made is the most important thing. A financial plan should be monitored and reviewed after it has been made. Constantly monitoring the performance of your funds, investments, and other assets is highly crucial. Determination to follow your plan is the key to achieving all your goals.
A financial plan is crucial for every human being. It helps you understand the importance of cash flow in terms of investments, income, and expenses. Creating the best financial plan is equally important, and this can either be achieved by doing it by yourself or taking advice from a financial planner.
A financial advisor is a professional in guiding people through it all. They also suggest the best options and help you determine what's right. They are highly skilled and are good at analyzing cash flows and goals.