Financial planning is the road map to a destination called financial freedom; a term generally used to describe the state of having sufficient personal wealth to live indefinitely without having to work for basic necessities. Financial planning is the process of meeting your life goals through the proper management of your finances. Life goals can include buying a house, saving for your child's higher education or planning for retirement. It provides direction and meaning to your financial decisions.
Financial planning allows you to understand how each financial decision you make affects other areas of your finances. By viewing each financial decision as part of the whole, you can consider its short and long-term effects on your life goals. With proper financial planning not only one feels secured but one can also adopt comfortably to the life changes as your other goals are on the track. There are, however certain myths associated with the financial planning.
1. Financial planning is only for the wealthy and oldies.
No it’s not. In fact it’s meant for anybody having aspirations of a happy family with children given best education, comfortable life style and enjoyable retirement. Start planning as early as possible. Don't delay your Financial Planning. People, who save or invest small amounts of money early, and often, tend to do better than those who wait until later in life.
2. Wait until a money crisis to begin Financial Planning.
How often have you thought of saving from next month? Then along comes next month an unexpected expense like a vacation, a mobile phone or some household appliance that you simply must spend on. A story that could repeat itself month after month. By developing good Financial Planning habits such as saving, budgeting, investing and regularly reviewing your finances early in life, you will be better prepared to meet life changes and handle emergencies.
3. Expecting unrealistic returns on investments.
There is no magic in financial planning. Financial Planning is a disciplined approach to manage your finances to reach life goals. It cannot change your situation overnight; it is a lifelong process. Remember there are events beyond your control such as inflation or changes in the stock market or interest rates.
4. Don't set measurable goals.
Set specific targets of what you want to achieve and when you want to achieve results. For example, instead of saying you want to be 'comfortable' when you retire or that you want your children to attend 'good' schools, you need to quantify what 'comfortable' and 'good' mean so that you'll know when you've reached your goals.
5. Neglect to re-evaluate Financial Plan periodically.
Financial planning is a dynamic process. Your financial goals may change over the years due to changes in your lifestyle or circumstances, such as an inheritance, marriage, birth, house purchase or change of job status. Revisit and revise your Financial Plan as time goes by to reflect these changes so that you stay on track with your long-term goals.
6. Make a financial decision without understanding it’s affect on other financial issues.
Remember that all of your financial decisions are interrelated. Each financial decision you make can affect several other areas of your life. For example, an investment decision may have tax consequences that are harmful to your estate plans. Or a decision about your child's education may affect when and how you meet your retirement goals.
All through your life several significant events buying a new car, moving to a bigger house, children’s education & marriage etc will occur at various stages. A little bit of planning and investing would make your life a lot easier. More on planning your finances later... Till then Stay Blessed!!
Good one............
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