Financial planning is the process of evaluating and analysing one’s earnings, spending, savings, and investments. to have enough finances to fulfil any financial goal, need, or emergency. It is a comprehensive and consistent process. It requires the constant assessment of one’s incoming and outgoing finances and developing the steps taken to enhance their overall financial state.
 

It starts with sitting and penning down monthly expenses. goes on to budgeting and tracking expenses. It then moves to wealth-creating actions like saving, investing, and retirement planning. At its core, financial planning is observing one’s financial habits and seeing if they align with the life they want in the present and future.
 

Often, many individuals delay financial planning or go about it in a very vague or inaccurate manner. This can delay their goals and steer them away from the life they want.
 

Let us understand the importance of financial planning through benefits of financial management.
 

Benefits of Financial Planning
 

With financial planning:
 

• You can always track your expenses.
  
  One of the foremost benefits of financial planning is that you are aware of the influx and outflux of your money. You can track your expenses and become mindful of your spending every month and throughout the year. This tracking instils financial discipline and extreme clarity of your end goals in life.
  
  Once you know where your money goes, you can separate your needs from your wants and cut back on unnecessary spending. Habits like excessive shopping or splurging come to an automatic stop when you sit and note down where your money goes.
  
  This crucial first step of financial planning lays the foundation for a healthy approach to financial management, unlocks other financial benefits, and makes the later stages and types of financial planning easier.
  
  
• You can save in a goal-oriented manner.
  
  Saving money is something we often learn at a young age. It starts with putting coins in the piggyback and working part-time in college for some extra cash. But adult saving requires a lot more thought, planning, and consistency – which is where financial planning can help.
  
  When you start noting where your money goes and tracking your spending habits, you can begin to save with a clear goal in mind. Haphazard or aimless saving might help you save at first, but to make saving a regular practice, it is essential to have clear-cut and actionable goals.
  
  For instance, if you want to save for your child’s higher education or marriage, you have to decide what percentage you can remove from your monthly/ yearly income for that goal. A financial map can not only give you the estimated amount you require but entail the steps you need to take to make those goals a reality.
  
  
• You can invest and grow your money.
  
  
  Once you begin saving consistently, you can move to the next step of growing your financial empire through investing. One of the best advantages of financial planning is that it can give you clear insight into the investment options that will align with your goals/ needs and how much you need to set aside to invest.
  
  You will understand how much you can set aside from your savings each month to invest and how to build and diversify your investment portfolio. The advantages of financial planning are also maximised with the help of a financial advisor/ agent.
  
  
• You have a sufficient reserve for emergencies.
  
  A foolproof and all-rounder financial plan will help you accumulate an adequate amount for emergencies. Emergencies are often life-altering and can impact the quality of your life to a great extent.
  
  An encompassing financial plan can help you stay prepared in the face of challenging adversities like accidents, critical illnesses, lifestyle ailments, physical disabilities, job loss, and other problems that don’t come with a warning.
  
  You will not have to run around asking friends and family, borrowing money, and taking last-minute loans that have the potential to keep you in debt for a long time. Through the secondary income earned through your savings and investments, which will be a result of sound financial planning, you will have enough to sail through emergencies.
  
  
• You will have enough for retirement.
  
  Without financial planning, you run the risk of working beyond your desired retirement age and not having enough to sustain the lifestyle you want for your golden years. Financial planning can assist in retirement planning and establishing that level of security and independence you will need to sustain post your working years.
  
  It can give you the tools needed to fix the age you want to retire at, how much retirement corpus you will need to sustain your desired lifestyle, and set up active ways to achieve those golden years’ milestones. It can show you the investment avenues and saving plans that will help beat inflation and grow your wealth to the maximum.
  
  It can help you find the appropriate investment vehicles and retirement plans in India that will actualise and grow the corpus needed to fund your life post-retirement.
   

Conclusion

The benefits of financial planning start with you gaining clarity on what exactly you want from life and moving to realistic ways you can achieve it. It becomes a motivator - enabling you to stick to those goals and reminding you to cut back on unnecessary costs. Ultimately, it enhances your present and secures your future. Check out the Tata AIA life insurance company for more information on the right insurance plans for the benefits of financial management and planning. 

L&C/Advt/2022/Oct/2490