IS FINANCIAL PLANNING REALLY NECESSARY?

Before understanding the importance of financial planning, you must ask yourself whether you are prepared to achieve your financial goals.

“A goal without a plan is just a wish” - Antoine de Saint-Exupéry

Retirement planning, emergency medical expenses, home purchase, children’s education, etc. No matter what your financial goal is, you cannot simply achieve them by saving extra funds. With proper financial planning, you can counter inflation which is slowly reducing the value of the saved money. [YA1] 

What is Financial Planning?

Financial planning is a strategy to achieve financial goals in accordance with the present financial state and future expenses. [YA2] Financial planning is complex because your advisor needs to consider the current financial situation, financial goals, age, risk appetite, and several other aspects.

Saving money in banks cannot simply assist you in reaching your financial objective. Inflation can be the biggest threat if your funds are not invested wisely. Each financial instrument carries different risk exposure and can deliver varying returns accordingly. The selection of appropriate financial instruments and allocating funds suitably to achieve the financial goal is called financial planning.

Finance graduates might find it easier to plan their finances but for a common man, financial planning can be very confusing. It is always better to reach out for a professional financial planner to strategize finances and implement a suitable plan to achieve the goals.

Who Needs Financial Planning?

If you have a defined financial goal, it won’t become a reality unless you plan for it. Achieving financial objectives without a plan is similar to participating in a treasure hunt without a map.

Until the age of 20-25, the finances are mostly managed by parents. Once a person starts making their own living, the financial burdens start piling up. Eventually, everyone needs to take care of their own financial needs and the people that are dependent on them.

You might need to cough up high tuition fees for your children, travel the world, own an expensive apartment, or a yacht. At later stages, you are likely to support post-retirement expenses. Any goal that involves spending money, can be done better with the help of financial planning.

Financial planning is a necessity for every individual that owns or earns money and has one or more financial objectives. The earlier you start financial planning, the easier it becomes and vice versa.

Why Take the Professional Help?

If you are willing to go the extra mile, you do not need any professional help. You can take medicines on your own and do not need a doctor, you can cut your own hair, and you can even build your own house if you are willing to become an architect. Similarly, you can also plan your finances on your own but professional help might make things much easier and reduce the risks of failure.

A professional financial advisor can make a suitable plan to reach your objectives according to your current financial conditions. With professional help, you can enjoy financial security and reduce your burdens. Indeed, it is always good to do whatever you are good at and allow people to do whatever they are good at.

Benefits of Financial Planning

Ø  Achieve Goals Effortlessly: If you spend more time and effort on financial planning, you might have to spend less money to achieve your financial objective. If you buy a car on EMI, you will be paying more than the cost of the car. But if you start investing 5 years in advance, you can buy the same car for a much lesser amount. Financial planning reduces the cost of financial objectives.

Ø  Create More Wealth: If you save more than 80% of your income, but keep it in a bank account, a person saving 60% with financial planning will make more wealth than you in the long term. With proper financial planning, you can create more wealth with the same income and savings that you would do without planning.  

Ø  Disciplined Investing: If you make a financial plan and stick with it, you will be investing with discipline regardless of the market conditions. This will very likely lead to a disciplined lifestyle and lesser worries.

Ø  Live Debt Free: According to a report published by the New York Times, more than 25 people commit suicide daily due to debt burdens and financial difficulties. A countless number of people think about committing suicide due to debt. Financial planning will not only help you achieve your goals but will also allow you to live a debt-free life with no financial difficulties.

Ø  Better Lifestyle: Financial planning will help you create more wealth and lead a disciplined life with no debt. This means you will have lesser worries, more money, and more freedom to live the life you want. Eventually enhancing your lifestyle in multiple ways.

Ø  Lower Taxes: Investors can discuss their tax burden and issues with their financial planners. They will provide the best methods and investments to reduce tax liability and increase tax refunds.

Bottom Line

In simple words, financial planning is making a plan to achieve the financial objective after considering all the financial elements of the investor. With proper financial planning, investors can do much better with the money they save or own. There are plenty of benefits to spending time, effort, and money in financial planning. With a small expense paid to the planner, you can create manifolds and achieve your financial objectives effortlessly.

 [YA1]Seems that financial planning will reduce the value of money.

 [YA2]Repetitive