Let's have a look at the definition and its advantages
Definition:
Financial planning is a step-by-step approach to meet one’s life goals. A financial plan acts as a guide as
you go through life’s journey. Essentially, it helps you be in control of your income, expenses and
investments such that you can manage your money and achieve your goals.
Merits:
1. Increase your savings
2. Enjoy a better standard of living
3. Be prepared for emergencies
4. Attain peace of mind
Steps for successful financial planning
“If you fail to plan, you are planning to fail.”
1. Understand your current financial situation
Determine the status of your current finances, viz., your income, expenses, debt, savings and investments.
This is the first step in financial planning, as it gives you a good sense on the state of your finances and
ways to improve.
4. Implement the right plan
You need to select the right investment option based on factors such as your goals, age, risk appetite and
investment amount. If you are unsure on the funds you need to select for your portfolio, you can avail the
services of a financial advisor.
2. Write down your financial goals
Ask yourself: ‘what are the different financial goals I wish to achieve in life?’ Write them on a piece of
paper. Don’t hesitate to put down any goal because no goal is too small or too big. However, make sure that your
goals are specific.
3. Look at the different investment options
There are numerous investment options available to investors. In the mutual fund market alone, you can choose
from nearly 2,000 schemes. Different investment avenues help investors to achieve different goals.
5. Monitor your financial plan regularly
The financial planning process does not end once you invest your money. You also need to monitor how the funds
are performing regularly. If they don’t perform, you may need to replace them with better performing funds.
Quiz o'clock!
Test you knowledge about finally planning by taking up this fun and precise quiz