I am sure you will agree with me if I say, any journey would be easier if we have a route map. The same applies to our financial journey as well. Our financial journey is a long and very important one as our co-passengers are our beloved family members. Any obstacle we face or any wrong route we take can affect every one of us. Such is our relationship with our finances.
So planning ahead and having a route map in the form of a Financial Plan is very important. This helps us to stick to our financial goals and reach them on time with very less risk of missing out.
The process starts with understanding of where we are currently and where we want to be in future and planning how to reach there..
Knowing where we are financially is…
Understanding what you own and what we owe.. If what we own ie, our assets are more than what we owe ie, our liabilities then we have a positive net worth which means we are financially in the pink of health.. If it is otherwise, it is wonderful that you realised it now and can focus on getting better.
Knowing where we want to be is..
Identifying the family’s financial goals like buying a car, owning a home, saving for children education and marriage, accumulating retirement corpus, going on a family tour, etc. These goals must be realistic and attainable ones.
Planning to reach goals..
after identifying each goal, measuring the amount required in future to reach them comes next. Inflation is a very important factor we must not miss while estimating the future amount requirement. These goals will be of different time frames short-term, medium-term and long-term triggering at different stages of our life. The investments have to be mapped to the goals accordingly by choosing the right investment products.
Dealing with risks and emergencies..
In Spite of having a very good plan in place to reach our goals, there is always a chance of having obstacles which may abstain us from reaching our goals like theft, a health emergency in the family, damage to property, an accident or death of an earning member.. All these risks can be addressed by taking adequate Life, Health and Property insurance.
It is always important to be prepared for emergencies. Having some liquid cash in the bank or easily withdrawable investments to meet emergencies so that we don’t bump into our investments that are meant for reaching our goals
Minimising tax payouts..
Tax planning needs to be a part of financial planning which really helps in making sensible tax savings rather than taking haste tax saving decisions like buying an insurance policy or parking some money in an investment product just to save tax in the last minute. This kind of acts really ruin the objective.
Seeking professional support..
creating a perfect financial plan requires professional expertise and it is good to seek professional help in your financial matters like how you seek a doctor’s help in health matters. The professional will help you not to make any big financial mistakes.
All the best !! In our next article let us see more details about each one of the aspects we discussed here..