♦ Why does every one Need Financial Planning?
To find out the real cause of this question. We are facing an important question about this such as: what do we do when we want to go somewhere? There are some alternative questions arise. They are: What is the best way to go there? Will there be traffic jams? Is it better to take the Uber, Patho or bus? Should some one drive me there instead?
There are available options in front of us. If we evaluate these options, and then it is very easy to make a good decision about this. But a planning process is involved in this connection and various steps in this planning process. Planning can be for the short-term, medium-term and long-term.
It is the same in personal financial planning except the timeframe that is for a longer period. Actually, we should be looking as far ahead as our retirement years.
Personal financial planning involves asking questions about our future, our dreams and goals. It is thinking about what we want to do in our life, such as getting married, buying a car or a house, having children and planning for their education.
To achieve our life dream and goals, we should need to plan from the financial aspect. In personal financial planning, we look at how we will be budgeting, saving and spending our money over time.
There are five steps in personal financial planning such as assessing where we are now in financial terms: Setting goal, Creating a financial plan, Implementing the plan, Monitoring and reassessing.
♦ Benefits of Personal Financial Planning:-
Many people think financial planning is a hassle and that it stops them from doing some fun things. But this is a wrong concept. Because it ensures our safety and security in future life. If we consistently live on a budget surely we would have to sacrifice some fun activities now. Think about it, if we have to save, we can always budget out money in such a way that we have some money to go out with our friends and having a good time. If we set a good financial habit, we can always have more fun in the future.
♦ With a personal financial plan, we will:
• Have more control of our financial affairs and be able to avoid excessive spending, unmanageable debts, bankruptcy or dependence on others.
• Have better personal relationships with people around us, such as our family, friends and colleagues because we are happy with our life and not borrowing any money to make ends meet or expecting hand-outs from others.
• Have a sense of freedom from financial worries because we have planned for the future, anticipated our expenses and achieved our personal goals in life.
• Obtain, use and protect our financial resources, throughout our life time, not only for ourselves but also for the people we love.
With a good personal financial plan, we will be more informed about our future needs and the resources that we have. We will also have peace of mind knowing that our financial situation is under control.
♦ The personal financial planning processes are:
♦ To understand the benefits of personal financial planning, we must know our life stages and financial goals and we:
• In our adult life will go through various stages from starting a career to retiring, from being single to getting married, having children and sometimes being single again. In various phases in our life, we have different priorities, responsibilities and financial goals.
• Each stage of our life presents different opportunities and challenges. Discipline and perseverance play a key role in maintaining a reliable financial strategy. As our life changes, so do our needs and goals. Sound financial planning can prepare us to meet them successful.
• When we are in our 20 years, we shall be looking for money and spending it differently from when we get into our 50 years. For example, when we are single, we probably want to have enough money to make a down payment for a car or go on a holiday with our friends. After getting married, we may want to buy a house later, when we have children, we would want to plan for their education and maybe even start a retirement fund.
• We have to adjust our financial priorities to meet the varied needs at different points of our life. Therefore, how we spend our money as we go though our adult to life depends on our financial goals.
• In fine personal financial planning is important to provide us with peace of mind, security for our future and a better quality of life. It is also essential in achieving our life's dream and goals.
The writer is Director of IDRA