From ensuring financial security for your family to planning for a comfortable retirement, all is possible through a proper financial planning.
But most of the people don’t really think to adopt a systematic approach towards planning their finances. Financial planning helps managing your finances comprehensively. It helps enhancing financial security and achieving your life’s goals.
In this article, we will cover all about financial planning, how does it work and how it helps build wealth and fulfill your financial goals.
Also Read: Thumb Rules in Personal Financial Planning
What is Financial Planning?
Financial planning is a systematic approach which helps achieve your life’s goals in planned manner. It enables you to take measured decisions about managing the finances, which further facilitate you towards achieving future goals and strategic objectives in life. It includes major aspects such as budgeting, saving, getting out of debt, strategy to fulfill key financial goals, etc.
A Financial Plan comprises of document that evaluates an individual’s present and future financial state, identifying long-term monetary goals, and adopting strategies wisely to meet those goals.
When it comes to crafting a financial plan for yourself, it’s advisable to seek professional advice from a financial planner who will assist you managing the personal finances and meet financial goals more efficiently.
Related: Golden Rules of Financial Planning
How Does Financial Planning Work?
To create a financial plan, you need to follow a step-wise financial planning process that facilitates you to meet goals. While seeking financial planning, it is vital to firstly recognize your needs and goals. Below given are the points that you need to consider.
- Assess financial standing
- Define goals
- Start investing
- Pay off debt
- Create emergency fund
- Insurance and real estate planning
- Tax planning
- Retirement planning
SMART Goals in Financial Planning
When it comes to creating goals, it is advisable to choose SMART goals.
You must set a financial goal which should be
- S – Specific and clear
- M – Able to measure
- A – Achievable and action-oriented goals
- R – Relevant and realistic
- T – Time-specific goals
How to Build Wealth through Financial Planning?
Let’s go through some financial planning tips that help build wealth.
Identify Financial Goals
When it comes to maximize your assets, you need to recognize key financial goals. After identifying the goals, you need to devise an investment strategy that helps fulfill such goals. You must take assistance from a financial planner to formulate a strategy.
Invest to Meet Goals
A financial plan defines specific goals such as buying a dream home, higher education for your children, plan for retirement, etc. that you want to achieve. To meet those goals, you need to invest wisely that ensures high ROI along with safety of capital amount. It does not put your investments at risk and also helps to build wealth.
When seeking for returns in range of 12-15% or higher, you may need to invest with equities or mutual funds that come with high risk but offers high returns.
Personalized Investment Strategy
Financial planning helps build wealth and maximize your assets with help of a customized strategy that matches your earnings potential, lifestyle, and tax profile. It should be adapted to tax changes that further helps minimize your tax obligations and maximize opportunities to avail various monetary benefits and concessions.
You should pick from tax saving investment options that provide high returns and help reduce tax liability. A right investment structure with diversified asset-allocation approach help protect asset value and build wealth.
Related Reading: Investment Tips for Beginners in India
Monitor Financial Plan
After implementation of a financial plan, you are required to monitor it in regular intervals to ensure things are going in the right way to achieving the goals. Also, you must make adjustments, if necessary.
Also Read: Financial Planning for Young Adults
Over to You
Financial Planning is absolutely essential to manage your finances and meet your goals. It also helps to create wealth and secure financial standing of your family. You may contact to a financial planner to seek professional assistance to get it done right.
Also Read: Tips to Become Rich from Nothing