Planning for the financial future helps in several ways. It improves your ability to set goals, save, plan budgets, invest, borrow, and manage risks and taxes*. People who spend time on financial planning can better fulfil their objectives. They can complete big-ticket purchases, tackle emergencies, provide for children’s education, and retire comfortably.
 

Financial Planning: Definition
 

Financial planning is about managing finances to achieve financial goals in the best way possible. It is not about spending less, saving more, or having a lot of money to make huge investments. Instead, it is about prioritising financial goals and fulfilling them to derive the greatest benefits from your decisions.
 

Financial planning in India is a must for anyone who has financial goals and aspires to achieve them efficiently. You don’t need to be super rich to prepare a financial plan. Nor do you have to be someone nearing retirement. Regardless of your age, occupation, or income status, you need a financial plan. Your financial situation impacts every aspect of your life. It influences your living standard, the number of vacations you take, and retirement. With direct financial planning, you can enjoy peace of mind. 
 

Objectives of Financial Planning
 

After understanding financial planning meaning, you must learn the objectives of the process.
 

• Track current expenditure and adjust it to manage income optimally
• Save money for dealing with emergencies
• Prepare for financial independence in different phases of life
• Pay and clear off debts
• Set aside funds for future financial commitments and retirement
• Determine timelines to meet financial goals
   

Steps in Financial Planning
 

By now, you have understood the importance of financial planning. The steps involved in the financial planning process are as follows:
 

• Evaluate your financial situation.
  
  You can start planning your finances at different stages of life. The first step is to assess your financial position - income, regular expenses, debt, etc.
  
  
• Prepare a financial budget.
  
  Make a list of the different income sources. Write down the different expenditures. Divide funds into different expense categories. Set aside a specific amount for investments and emergencies. Start each month with the preparation of a financial budget and spend accordingly.
  
  
• Plan long-term investments.
  
  After your monthly financial plan is ready, focus on the long-term commitments. Decide on the loans you need to build assets, the funds you require for your child’s education, marriage, and other aspirations like a vacation, starting a business, etc. Also, evaluate your retirement expenses.
  
  Start your investment journey when you know of the long-term financial goals, risk tolerance, and inflation rate. You can look at the various retirement plans of Tata AIA. The guaranteed¹ return plans provide the benefits of life insurance with regular income or savings for a lump sum. Financial planning in insurance helps you yield the necessary benefits.
  
  
• Follow the financial plan.
  
  You can focus on different types of financial planning depending on your requirement. Once you have allocated funds to various expenses and investments, plan the timelines for achieving long-term goals. Activate your financial plan by limiting expenses and increasing investment funds accordingly.
  
  
• Revise the financial plan.
  
  You cannot have the same financial plan for decades. You will need to adjust it as per lifestyle changes and the increased cost of living. Focus on the various financial planning tips to change your plan and accommodate essential expenditures without impacting your retirement plan and other investments.
   

Financial Planning Importance

• Income management
  
  One reason you need to plan finances is to manage money effectively. A detailed financial plan can assist in devising a strategy that will help you calculate the number of resources required for your monthly expenditure. It can make it easier to determine how much money you need for taxes and how much you can save from a particular amount.
  
  
• Improved cash flow
  
  As your income grows, the overall retained earnings increase. Financial planning is vital for the day-to-day operations of your personal and professional life, where you must fulfil various commitments as they arise. After analysing your spending habits and budgeting, you can identify activities that need more attention.
  
  Prioritising expenses assists in tracking working capital, limiting overhead costs, and eventually increasing your overall capital.
  
  
• Securing inflation
  
  Inflation is the biggest enemy eating your savings. The value of money has plummeted significantly in the last few decades. In the future, it is only expected to worsen.
  
  Thus, you must organise your finances for a brighter and more secure future. Financial planning for individuals prepares them to tackle growing inflation.
  
  
• Better investments
  
  A financial plan focuses on your risk appetite, long-term objectives, and specific situation. It helps in making essential financial decisions depending on your needs and objectives. Through the financial planning process, you can create and plan financial resources for the future.
  
  
• Enhanced portfolio returns
  
  The essential components of financial planning include cash management, liability management, risk assessments, financial decisions, and goal planning. A financial plan helps in developing an integrative investment program. It considers your risk appetite, goals, and available liquidity. As a result, you increase your portfolio returns. 
  
  
• Guarded retirement plan
  
  For early retirement, you must start investing early. The benefits of compounding are best when money is invested for a long time. Smart financial planning helps in building enough corpus for retirement.
   

Conclusion
 

Most of your life is spent planning for the future. But what can you do to make the future safe and secure? As you work hard to achieve every milestone of your life, remember to prioritise financial protection. It is necessary to have adequate insurance and investments in appropriate schemes for wealth creation. Once you understand the features of financial planning, start building the plan to meet your financial goals.
 

Here, we offer different life insurance policies. These include term plans, retirement plans, saving plans, etc., for you and your loved ones to enjoy ultimate protection.

L&C/Advt/2023/Jan/0024