The importance of financial planning cannot be stressed more in the current financial scenario, with the markets becoming more uncertain. Financial planning is a prerequisite to lead a comfortable life throughout even after retirement. It helps in managing the income and expenditure in such a way that we achieve both our short-term and long-term goals. It helps the individual assess his current financial position, and make adjustments in his spending pattern to realize the long-term goals as well.
Benefits of financial planning
Financial planning is required to as the uncertainty factor is not limited to the market but also us as Humans, it is important that we maintain or improve our standard of living. It serves as a guide to financial independence.
- Assess Current financial position – Before we start off the planning, we would definitely assess our current income and expenditure. This will give us an idea of where we stand with respect to our personal finances. It will help us curtail unnecessary expenditures so that we can make way for some savings.
- Investing opportunities – Efficient planning will lead to better allocation of the funds and provide for investing opportunities. Thus it will lead to further increase our wealth.
- Tax planning – Tax planning is a part and parcel of financial planning. This will help us determine the places where we can save taxes like investing tax-free savings deposits, Life insurance policies etc
- The standard of living – Better planning keeps our expenditure well within our control. Efficient planning will also help us multiply our income. Thus we would be able to maintain a good standard of living irrespective of retirement or any other uncertainty.
- Ensures financial Stability – Changes are bound to happen as we progress in life. Financial planning will help us anticipate the financial needs in different conditions and ensures financial stability at all times
Once you have planned your finances, periodic review of its effectiveness will help in adjusting the plan to the changing needs. It is best to understand our finances before we make our investment decisions. This will help us to ascertain the extent of risk we can take to enhance our wealth.
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