Everyone faces ups and downs in his/her life. Everyone needs money to come out of their rainy days, for which, a good financial planning is needed which can give their family a self-sufficient life. These days, you can’t live a better life without financial planning. That is why; every person should plan their finance as per the income structure.
Following are some reasons governing the need for financial planning:
Basic needs: Presently, Living life is getting expensive day by day. Inflation rate is scaling upwards. All that a middle class person earns fetches him just enough to fulfill his day to day expenditure. Considering this Scenario, it is difficult to plan future without having a financial plan .Taking inflation into consideration, You may get what you want today but might not be able to get what you need a few years from now. Example: If you buy a new car now, will you have enough savings later to buy a house. This is where, financial planning play an important role.
Saving tax: If you are in a 20% or 30% tax bracket, you pay a substantial amount of your income as income tax. But if you are having a financial plan i.e. if you invest your money in some instruments which are exempt from tax, you can save a big part of your income and also earn good returns on the same.
Secure future: Today, You are young and have a huge amount to spend but what will you do when you would be at 60. By that time, You would have retired and wouldn’t be earning a monthly fix income. In that stage, you will feel the need of retirement plan. So start a future planning from now onwards else you will have to repent later.
Are you saving enough: Whether you want to fund your children’s college education, save for retirement, or buy a new house, most financial goals entails a need for periodic savings. The financial planning process will help you identify how much you will need to save periodically— and in total— for each of your goals.
Finally, do you need to hire a financial planner to do all this: My answer is yes, but I am severely biased. What a good financial planner will do for you that you cannot do yourself is to take an objective, unemotional look at your situation. He will then apply his expertise, training, and experience to your unique financial needs.
One last (biased) suggestion: Always hire a fee-only financial advisor, someone who does not earn a commission based on selling you a financial product. This eliminates a huge potential conflict of interest.
Where can you invest: It is hard to suggest someone regarding potential investment opportunities as there may be a lot of concerned factors .Like what is your risk appetite, what are your future goals and so on. You may invest in Fixed deposit plans if you don’t want to take risk but there is a saying that no risk, no gain. One more option is you can purchase an LIC Plan which can give you a benefit in tax saving. I will suggest you to invest after taking your risk into consideration and Mutual fund option is the best in this category where you can get a good return in limited risk. Just go for it but after consulting some specialist.
Remember: No plan, no progress: A financial plan is not about getting rich, and you don't have to be rich to have one. It's about doing more with what you have. Financial planning is not a one-time event, but rather an ongoing process. The plan is a base from which to make financial decisions, but the plan can and should change over time based upon changes in your personal circumstances.
Regards
Dharmendra Sharma
CAclubindia
