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Here are the 6 steps involved in the financial planning process.
The cost of a financial planner is not fixed. There are various ways in which you can pay a financial planner:
Yes, you can also create your financial plan. You can use the multiple online financial calculators available on the life insurer’s website to estimate your investment needs. However, it is recommended that you approach a professional financial planner once in a while to have a comprehensive financial plan.
Financial planners can help you prioritise your goals and investments in the best possible way so that:
Financial planning usually has three major stages:
You can have three types of financial plans based on your ultimate objectives:
It is a popular rule of budgeting which the various percentage of your income you have to allocate to the 3 types of expenses. The three types of financial purpose you have in your life are:
The rule dictates that you should devote:
A good financial plan must be an elaborate and comprehensive plan. A good financial plan also provides you with simple actionable steps to guide your money.
A financial plan should be made in such a way that it accommodates the following:
A good financial plan is also easy to review and upgrade.
There is no such rule that you should have a certain sum with you to get a financial planner. A financial planner can help you in the majority of personal financial matters. Usually, if you have a regular income and can save some of the disposable income, you can think of hiring a financial planner.
However, you can contact a financial planner to resolve a challenging financial matter as well. A planner can provide you with recommendations to make use of your money in the best way possible.
Financial planners can help you in every stage of your money:
1% of investment amount would mean about 0.5 – 2% of your annual income depending on your savings ratio. Your savings ratio can range from 10% to 50% of your annual income. So, if you are earning Rs. 10 lakhs a year, you end up giving about Rs 10,000 to 20,000 to your financial advisor as fees.
This is recommended for those advisors who are acting as your representative and helping you with creating and implementing a comprehensive financial plan. Financial planning activity can offer huge long-term dividends both in monetary and emotional well-being.
A good financial advisor is one who handholds you through your financial journey. If your financial advisor is accompanying and guiding you closely 1% of your annual investment is a reasonable fee.
Yes, it is always beneficial to meet a financial planner to discuss your financial matters and double-check your decisions. Financial planners are expert professionals well versed in the investment markets as well as personal financial situations.
Additionally, financial planners can help you account for multiple factors in your decisions. For example, tax liability, ease of withdrawals, and market variability.
An example of the impact a financial planner can have on your decision could be your retirement savings. If you happen to invest and withdraw your pension without a financial planner, you will:
Here your pension will attract taxes at a slab rate. With a financial planner, you can invest in instruments to enable a tax-free pension after retirement.
Financial planning has several benefits, not only for your financial health but also mental and emotional. Some of the prominent benefits of financial planning include:
Financial planning can bring more clarity to you about your current financial situation and help you achieve the desired status in future.
The most important step in financial planning is the implementation of the plan. Only with the implementation, you can realise the actual potential of your financial plan. You can create a simple financial plan for a single goal, or a comprehensive financial plan to cover multiple life goals.
However, the only implementation of the actionable plan will derive the ultimate results for you. Implementation or execution of the plan may often take months. For example, if you need to change your present spending habits to fully execute your financial plan, you need to make changes to the budget.
While executing a financial plan for the first time, first you must execute the contingency plan. Contingency plan includes – life and health insurance, and emergency fund needs. Only after this can you start implementing other parts of the plan.
A comprehensive financial plan includes all aspects of your financial life. The plan must address the following primary areas of your financial and investment needs:
A comprehensive plan helps you address multiple areas of your financial life, starting from the household budget to your most ambitious long-term goal. A comprehensive financial plan helps strengthen your financial health and future.