Your Trusted Partner in Financial Planning
Desires to fulfill any of the goals or aspirations of having luxurious things such as owing a home, starting a new business or finding a suitable way for a comfortable retirement requires a defined strategy and plan. At the core of every action remains the need of financial planning.
This is where we can help. Our wide range of financial services including financial planning, tax planning, and plans related to insurance, mutual funds, bonds etc. will come handy as per your budget and requirements.
Steps involved in Financial Planning
Income Determination
Tax Planning
Estate Planning
Social Security Planning
Retirement Planning
The determination of income is the first step in financial planning. How much income is being earned and how much is available for investment are the points to be considered.
Saving is another crucial aspect of financial planning and should commensurate with your business goals. There is a golden rule of 50:30:20 of income. Where 50% of your income goes for necessities, 30% goes to needs, and the remaining 20% is available for savings. The allocation of income between needs and savings may vary depending on the requirement of funds.
Fixing the financial goals is also an essential aspect of financial planning. Goals are to be set as per the requirement of funds i.e., Short term, Medium term, or Long term. The level of savings is to be determined as per the goals fixed and the requirement of funds.
It is also an essential aspect of planning. One has to retire after serving for specific numbers of years of service, mostly on completing 60 years of age. It lets you lead the same standard of life, which you were living during your working period. It requires long-term planning. Here funds are to be invested for a period of 15-20 years to generate a good amount of corpus.
Periods of Fund Requirements
In our life, we have different goals to be achieved. We need funds for our livelihood, Marriage, Housing, Health, Higher education of a child, Marriage of Child, and finally, for our retired life. Funds are required for all these activities. Therefore, meticulous financial planning is needed to achieve the same.
Short Term
Short term funds are required to meet the current expenses up to one year. Usually, these are needed for necessities and unforeseen expenditures.
Medium Term
Medium-term funds requirement is to meet the expenses required above one year to five years period. It mainly consists of the purchase of capital items of necessities, Education, Medical, etc.
Long Term
Long term funds are required to meet the expenses to be incurred above Five years. It mainly includes funds needed for the higher education of children, purchase of a house, retirement planning, etc.
Financial Planning Advantages
- It helps in better management of our Income. We can manage our cash flow to optimize our financial requirements. It helps in fixing the level of expenditure and savings as per our future financial goals.
- It enables us to fix our financial goals as per our needs. We may set short term, Medium-term, and Long-term goals as per our requirement.
- We can monitor and evaluate our investment periodically. We can reorganize or change our investment strategies as per the returns being generated. It enables us to optimize the return on the investment as per our financial goals.
Shortcomings of Financial Planning
- Uncertain Future: No one can assure of the future performance of any investment schemes. It affects the reliability of Financial Planning.
- Past performance is not an indicator of future performance: The assumption in the Financial Planning is usually based on the past performance. It is not sure that future performance will also be on the lines of past performance.
- Impact of External Factors: External factors like government policies may adversely affect the economy. It may cause an adverse impact on the financial market also.
- Long Gestation Period: Financial Planning is a long-drawn process. It is planned for an extended period. We cannot be sure that things will move as planned. We have to keep patience.
Despite shortcomings, the importance of the financial planning cannot be underestimated.
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Social Security Planning
It mainly includes Insurance planning, Both Life and Health insurance. Life Insurance is obtained to save the family from the hardships in the unfortunate death of the family’s bread earner. Similarly, medical treatments have become very costly nowadays. Health insurance covers the unforeseen expenses of health problems.