Introduction
It's not how much money you make, but how much money you keep, how hard it works for you, and how many generations you keep it for quotes Robert Kiyosaki.
Hence, financial planning is not about what you earn but how efficiently you manage the money that you earn, keeping your long term goals in mind.
What is Financial Planning?
Financial planning refers to the evaluation of the current and future financial state of a person or entity. Further, it requires planning for effective utilisation of financial resources to fulfil the current and long-term objectives of such person or entity. At an individual level, it involves an investment plan, expense management as well as the retirement plan. But at an entity level, it requires capital budgeting, projection or forecasting, the framing of financial policies on cash control, investing, borrowing for optimal utilisation of enterprise resources, and sustainable growth of the business.
Activities involved in financial planning are:
- Evaluate the business environment
- Establish the business vision and objectives
- Recognise the types of resources required to achieve these objectives
- List down the resources needed and quantify the same (labour, equipment, materials)
- Determine the total cost of each type of resource and create a budget
- Identify any risks or issues to be addressed with the budget set.
Conclusion
Financial planning will help ensure the right balance between the inflow and outflow of the funds. It allows the business entity or the person to accommodate the changing market conditions and, in turn, revise their plan.
What is the current situation?
Personal finance holds prime importance for individuals as they begin to work. With the income levels in India reaching all-time high every passing year, the demand for new products and better lifestyle has caused a spike in spends too. Therefore, financial planning takes the forefront.
How to implement Financial Planning in different scenarios?
There are many fund management houses and financial advisors available in the market to plan for your finance and future investments.
Early financial planning enables people to meet their goals due to the long-time horizon. It will ultimately put lesser pressure at present on your pockets. The cost of planning is also minimal. It's proven that 'Value of money increases with time' and hence now is the right time to invest!
