A comprehensive plan, including an individual's present financial status, short-term and long-term objectives, and the strategies to achieve them, is known as a financial plan. Whether running a firm or a family, financial planning helps you solve problems more effectively. It prepares you to confidently deal with circumstances and scenarios that might require financial assistance. 

One can maintain a financial plan on their own or can hire a financial planner for the job. Financial planning is a process that aims at bringing you a sense of security, helping you achieve your goals, and offering you peace of mind. Stick around to know more about the importance of financial planning. 

Importance of Financial Planning

Here is the importance of financial planning:

• Income Management
  
  A smart financial plan aids you in managing your money in the best possible way. It helps you develop a strategy that would assist you in the calculation of the wide range of resources you need for your monthly expenditure. Whether you are a company or an individual, financial planning helps in income management. Financial planning in India enables you to figure out the amount you would need for taxes* and how much you can benefit and save via them. 

• Better Investment
  
  The significance of financial planning lies in making better financial decisions based on your financial objectives and requirements. A good financial plan comprises your life events, long-term goals, and risk tolerance. Understanding your financial objectives and a sound financial plan helps you make better financial decisions.    
  
  A good financial plan helps you create an investment portfolio that helps you in your current affairs and helps secure your future. With significant investment plans, you can multiply your money and use it for a better lot. Tata AIA Life offers multiple life insurance policies for all occupations and age groups. You can check with them to begin your financial investment journey. 

• Retirement Plan
  
  Principles of financial planning include offering you a comfortable and happy retirement period. Life can get complicated when your income dries out and you still have monthly bills. Financial planning is essential to avoid such difficult times. Following a financial plan right from the start will likely never face any financial crisis during your retirement days. An excellent economic program helps you attain an adequate retirement corpus to support you and your family.

• Enhanced Return On Investment
  
  Financial planning helps you enhance the returns on your investments. It helps you invest based on your goals, available fund, and risk appetite. When you invest while considering these factors, you ensure better returns on your investment portfolio. Some of the vital parts of financial planning include the following:
  
  
  • Cash management
  • Financial decisions
  • Goal planning  
  • Risk assessments 
  • Liability management 

   

• Enhanced Cash Flow
  
  thumb rule of financial planning is that money attracts money. With a sound financial plan, you can grow your money and increase the cash flow. Income growth gives a push to our overall retained profits.
  
  Financial planning is essential for everyday operations in your private and professional life. You can concentrate on budgeting, saving, and expenditure prioritization. With such tiny steps, you can reduce overhead costs and easily track your capital. This, in turn, helps you with an enhanced overall wealth. 
  
  
• Goals and Dreams
  
  To explain the importance of financial planning, one needs to speak about individual goals and dreams. Financial planning provides direction to your goals in life. To achieve something in life often demands investment. Financial planning helps you save and plan on how to fulfil your dreams. 
  
  
  

Importance of Different Aspects in Financial Planning

• Income - With a financial plan, you manage your income better. You have a brief of your earned income and interest.. Thus, you will know that your choices are sufficient for your life goals.
   
• Expenses - We spend money on our wants, basic requirements, and luxuries. With financial planning, you get to check the unnecessary costs. If you spend overboard for one month, you will very well be within budget for the following months. 
  
  
• Savings - When financial planning, you keep a record of your income and expenses. Ultimately, you get an idea of your savings. With a financial plan, you allot a budget and get a picture each time you overspend.
  
  
• Investment - Financial planning would help you invest wisely depending on your income, risk appetite and goals. It will help you have a balanced investment portfolio. 
  
  
• Taxation - Worrying about taxes at the end of the year is not a wise step. With financial planning, you can begin planning from the start. You can schedule a strategy that ensures paying the least amount as tax*. There are various savings and life insurance schemes that offer you tax* deductions. 
  
  
• Estate planning - Estate planning means a smooth distribution of your wealth after your demise. The details of how your liabilities and assets must be taken care of are in question. A financial plan would help you present a broad outline of managing your estate after you are gone. 
  
  
• Retirement - Everyone desires a relaxed and carefree retirement. It is achievable if you plan your finances well. It would help if you were financially secure to take care of your bills even after you have no source of income. 
  
  
• Ups and downs of financial status - Life is full of changes. You start a family, change jobs, face a medical crisis, etc. You often make some financial decisions based on life's ups and downs, which might affect your living standard. With financial planning, you can be prepared for every change in life, big or small. 
  
  
  

Conclusion

India falls under a rapidly growing economy where people understand the importance of financial planning. Financial planning allows you to take control of your life when it comes to finances. 

L&C/Advt/2022/Jul/1686