Considering the uncertain market environment and unpredictability of the financial future, it becomes important to opt for a strategy that helps manage your money effectively.
In this article, we will discuss why personal financial planning in India is so much important in ours life.
What is Financial Planning?
Financial Planning deals with managing your expenditure, savings, and investments. It helps identify your short and long-term financial goals and create a financial plan that aims at meeting those goals.
A balanced financial plan provides a step-wise approach to meet your life’s key financial goals such as children’s higher education, buying a home, children’s marriage, retirement corpus, etc.
If you want to accumulate a corpus amount of Rs 7 lakh for your daughter’s college education, you need to make sure that your investments grow to this amount by her 18th birthday. Here comes the role of financial planning in your life.
Importance of Financial Planning in India
There are numerous points that bring a focus on the importance of financial planning in India.
Fulfill Money Needs
With proper financial planning, you can manage your income and expenses in a way that helps meet your financial needs on time.
You can save money even without a financial plan. But with a financial plan, you get good insights into your expenses and savings, so you can cut down your costs consciously. It helps increase your savings that you can invest to meet future financial needs.
Build your Wealth
If you are looking to maintain your current living standard in the future, you need to build a sufficient corpus. You may also want to buy a new house, car, going on a foreign vacation with family, etc. It requires a big corpus to achieve all these desires. You can achieve these goals upon investing the money with investment avenues that offer high returns. Investing in the right avenues and getting desired returns is only possible through financial planning.
Achieve Financial Goals
You have various financial goals in the bucket such as children’s education & their marriage, retirement planning, and many others. With a balanced financial plan, you can start investing to assure your financial goals are met. It is advisable to start investing early and take advantage of the power of compounding that helps build a corpus and meet your financial goals with ease.
When it comes to investing, you must consider some top investment options that offer guaranteed returns along with safety of invested amount such as, public provident fund, sukanya samriddhi yojana, national savings certificate, etc.
Better Tax Planning
Every year, you pay a significant amount towards tax. With proper financial planning, you can invest with avenues that provide tax deduction and offer high returns as well. It helps to reduce your taxable income and fulfill your life’s goals.
Financial Security for Yourself & Your Family
A balanced financial plan must include investments that ensure financial security for yourself and your family. By properly analyzing your financial requirements in the future, you can invest to obtain a safety net for the family. You can buy term life insurance that ensures financial security for your family. Also, you must invest in other insurance categories such as health insurance, motor insurance, & home insurance.
Prepare for Financial Emergencies
The future is completely uncertain and you have to be ready to face uncertainties like COVID-19. Financial Planning suggests creating an emergency/ contingency fund that helps you prepare for any financial emergency.
Create a Good Financial Plan
A good financial plan constitutes a step-by-step procedure that helps manage your finances and fulfill your goals.
A financial plan should include components, as specified below:
- Establish financial goals
- Investing to meet your goals
- Diversify investments
- Create emergency fund
- Insurance planning, and many more.
To know more about creating a Financial Plan, check our article on 10 steps of financial planning.
Financial planning is the most efficient way to increase savings, investing appropriately to fulfill your goals, and easily meet financial obligations for your family. Properly managing your finances helps attain financial peace of mind.
If you have any viewpoint or any queries regarding your financial plan, please feel free to comment in the below box.