When someone approaches with financial advice it is when you start thinking. It is either, “There are too many financial commitments and I can’t do much” or “How do I start?” We won’t realise how crucial is personal financial planning, since we tend to assume that we always have enough, but how much is enough? Personal financial planning is a process that guides an individual to plan one’s budget, savings, investment and retirement. As a matter of fact, it is a plan that everyone should have to ensure that he or she will have sufficient amount of finances to maintain their standard of living even after retirement and in some unavoidable circumstances.
Personal Financial Planning starts in the early journey of one’s life. It is a false perception that it is only for someone who has already possessed big amount of wealth or a rich person. It is a continuous and gradual process. Even if a person were to have considerably less amount of income he or she still should have a financial plan. Of course this is in the initial stage and as the finances improve he can develop more savings and investment strategies.
Reliance is an essential criteria in financial planning. With the amount of certified financial planners in the market, you may have abundance of advice. Some people prefer to plan their finance and some rely on certified financial planners. For instance, we may think that we have insurance to cover it all, but how much should one invest in insurance? One may also have commitment towards his house, vehicles, children’s education and not forgetting balancing taxes. The cost of living is rapidly increasing that it creates some sort of insecurity in a person’s financial situation. Of course one should know how to balance his income and expenses, in order to invest for a life time’s interest. Investment is most essential in order to lead a comfortable and secured living. However one should be also careful in choosing his methods of investment as some can be risky, nevertheless he should be very alert to manage his investment funds. There are different types of investment i.e. properties, stocks, public funds and etc. Therefore financial planning is more about your life than finances.
Financial planning are basically these three stages: wealth protection, wealth accumulation and wealth distribution. Wealth protection consist of both material and non material wealth. These are like “life and general insurance” kind of situation, where there maybe some illness, disability, accidents or death. As for the material wealth such as vehicles, houses, offices need to be secured from theft, fire and any other hazardous situation. Non material wealth is nothing but you and your dear ones. Situations like this may draw you to financial crisis, thus structuring financial planning is certainly significant and the first step in any financial progress. Next is wealth accumulation. This is of three steps; savings, time and return. It is best to start saving at a younger age. As for the rate of return is always allied with the risk that you are willing to take. It is always good to get higher returns from investments. Lastly wealth distribution is by owning properties, lands of your own and later bequeathing assets to the next of kin. With strategically planning on your assets and finances, the probability of secured and comfortable living is rest assured.
Article by: Meera Thuraisingam, LLB (Hons) London
Image courtesy of: philippinesmotivationalspeaker.com
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