Often the term ‘financial planning’ can be heard. But is it just having money and some bank balance? While this is partially right, financial planning covers even some broader aspects which just not limit an individual for a particular periodic planning but for a longer period of time.
What Is Financial Planning?
When this comes in the mind, the next thought to follow is how much one should save or how much one should spend? And even how much is needed to secure a future? While these are the essential components that constitutes the money making process, just saving every month in your bank account cannot turn your savings to a good amount. For this, different policies, investments are required which will multiply your savings rate.
So, when you are up for a financial planning, keeping these points in mind is crucial enough, which will cover the whole process of this broad spectrum term.
- Protection of wealth and assets while including your life too.
- All financial transactions should be tax efficient.
- Passing the assets to the right owners.
In short, the process is all about ensuring that the life goals are properly met and not just money is what is left as a future aspect. This should be carried on in a systematic manner which in fact is the essence of progression and wealth generation.
How To Do It?
While the details on financial planning have been enlisted, it is crucial to know to do it in a proper manner. For this, the beginning tool in this aspect is going to help you out.
- Pay Yourself First: Make it a thumb rule to save an amount every single month. If that requires cutting down your luxuries, do it simply. Just spend on the essential commodities of life and make sure to save first before making investments in other expenditures. If there is some extra sum, spend it with full freedom. To make profit in your savings, you can invest them under different plans and policies, which will, over the period of time give you a good profit margin. With the advent of the internet, every single detail is available online. Go through the T&C and know the risks involved with it as well.
- Track Your Net Worth: It is very essential to know where you exactly stand and make planning accordingly. To cut it short, it is about asset to debt ration. The tendency should be having asset higher than the debt, and this is when you can be in a comfortable position.
- Set A Budget: While spending is equally important, the process can be easily managed if you have a set budget. Make prior calculations and spend accordingly, which will help you to avoid any form of extra debt.
- Retirement: While this often gets ignored, it is yet another vital thing to be considered. This is the period when work and income stops but not expenses and at an age of 65 years, your body will even give up. So an initial planning will ease this phase of your life.