Financial planning gives a direction to our lives. Without knowing our finances, our goals and the timeline we expect to reach each goal, life moves like a rudderless ship.
A person, who knows the following facts, leads an organised life in terms of money matters than one who doesn’t know them clearly, despite whoever earns more:
- How much one earns
- How much one expects one’s earnings to grow
- How much one spends on the day-to-day
- When one expects to stop earning.
We all know a few facts, or we can know them easily – how do the sovereign bonds grow in the country (the risk-free rate) and how the consumer prices are growing (inflation).
We all know the most certain in life is to die, but we do not know when to die! We know how healthy we are, but we do not know what health issues are there in the store!
Financial planning helps us to leverage the known facts, to balance the unknown. It helps us to draw a clear picture of our or our dependents’ future in monetary terms. Expect to know the following from your financial plan:-
- How much funds you should make readily available for emergency use.
- Your human life value, so that you can avail a correct amount of term insurance cover, would empower your family to maintain the same lifestyle in case of peril.
- How to take care of all your major life goals (like child education, marriage or house purchase) in due time, inflation-adjusted.
- How to fulfil a special need, like taking care of a special child or an ailing dependent.
- What should be your retirement corpus to maintain the same lifestyle throughout post-retirement and how to avail that in due time.
- How to tackle health issues financially, without spoiling the family’s wealth.
- How to optimise tax liability.
- How to build wealth in long term, and leave a strategy to transfer to the right hand at the right time.
In one word, financial planning empowers us to lead an organised life by taking care of all other than emotional worries, and achieve all milestones in life.
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– Aditi Nundy