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financial planning

‘Financial planning’ is a buzzword since last few years!

If we see our parent’s generation, they did manage their money, investments all by themselves but still did well & are living financially independent life post retirement.

Today, scenario is altogether different! Many things are changed like-

  • Bunch of new investment products have been introduced since last 15-20 years
  • Our lifestyle, spending on items on different brands, has increased to a great extent
  • Working life has undergone massive change with introduction of new sectors, corporates, job titles, increased competition & longer working hours.
  • Lesser time in hand to look after own money management

Reasons like above compel all of us to consider ‘financial planning’ & that too with right approach.

Though there is lot of literature available on the subject & concept, there are some expectations & realities associated with it.

Let’s understand them-

Financial planning is for rich & affluent:

It’s a general observation & misconception of people from middle class & upper middle-class category that, ‘financial planning’ is for rich & affluent people of society.

Since they have made lot of money, its their need to plan it well & invest.

But, the reality is ‘, financial planning’ is for everyone!

It doesn’t matter whether you are a middle class or upper middle-class person, financial planning is your need.

Whatever income you earn from your job, profession or a business, has limited sources of generating income but you too have multiple ways where you spend money on.

‘Problem of plenty’ comes with many investment options available today. It applies to you as well. Its your need to choose a suitable investment option for you.

You have goals for your future same like rich people. To achieve them, in best possible way, you need financial planning.

Most importantly, your standard of living will income gradually. To keep up with the same & to maintain that, financial planning helps.

So, financial planning is for everyone!

Financial planning means only portfolio management & asset allocation to earn you higher returns:

Well, when people think of financial planning, they think of earning higher returns through investments n different options. They simply think that, their financial plan will take care of the rest.

However, the reality is ‘financial planning’ assist you about making right & suitable asset allocation, guide you to build your portfolio based on your investment tenure, risk appetite & future goals.

It never guarantees higher returns but makes efforts to help you achieve your goals in best possible way.

Financial planning helps us to become rich:

Everyone likes to become rich one day! They expect it from their financial plan.

However, purpose of financial plan is-

  • to analyze your existing financial elements,
  • arranging them in suitable way based on your risk appetite, goals & tenure, 
  • Planning of your investments for future goals.
  • Assist you in choosing right & suitable insurance policy.

When you follow the above, one day you can become rich & financially independent.

Financial planning with cost free advice works well:

Today, lot of literature is available on ‘financial planning’ via you tube channels, blogs, websites, newspapers. People can easily follow them on social media, gather knowledge about it. They find it easier to implement them for their own money management.

They think that, it is good & free of cost, so they can easily follow them.

However, whatever comes free can cost you more than you can imagine!

Content available on social media via books, blogs, you tube videos, Instagram reels are ‘general advice’. Though they work well in creating awareness, throw light o different concepts of personal finance, they provide information which is ‘general’.

Please note that, in reality, ‘financial planning’ is personal & for your own money.

Your income, goals, cash flows, investments, responsibilities, liabilities differ from others. General advice may not work well for you always.

It better to ‘pay the cost in term of fees’ to a financial planner. But choose a planner, who is-

  • Works under regulations laid by SEBI from time to time
  • He/she is unbiased in approach to give you advice.
  • Doesn’t sell any investment product or insurance.
  • Has necessary qualifications & experience of the field
  • Maintains confidentiality & works in fiduciary capacity.

To avoid unwanted cost in future, its better to pay the fees to a planner which fits in the criteria as the above.

Financial planning works well all the time:

It’s a general expectation from that, once the financial plan is made, it will work well in all the market conditions & all life stages.

But we need to understand that, ‘every plan’ is based on certain realistic assumptions. These assumptions further lead to calculations which help in arriving at number of required investments, insurance policies etc.

Every year many changes take place in our personal & professional life. Many things can undergo a change right from income, responsibilities, liabilities, market performance etc.

In all this, financial planning also does undergo a change. To make It work for us always in best possible way, every financial plan needs a ‘regular review’.

Financial planning leads & shows us the way how we should manage our cashflows, investments & insurance policies.

Most importantly it helps us to be disciplined, self-assured & content with what we have / possess.

Changes in our behavior, thinking patterns & approach changes a lot once planning is done.

We may expect many things from our financial plan, but it works better for us when we do follow it, change our attitude, behavior & thinking suitably according to the same.

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