Financial Planning, the greatest issue for any corporate worker living up with a decent income. Financial Planning has always been associated with difficulties, tedious work, etc. like terms. On the other hand, if Financial Planning is done right, it can give a comfortable coming future in terms of finances and savings. So how can we define this,” Financial Planning”. Well to be precise, Financial Planning is a process where you manage your expenses and investments to get a financially stable future.
Let’s talk about the objectives which Financial Planning has to achieve to perform,
- Discovering capital Requirements: This depends upon factors like current assets and the price of the assets which are being held. Capital investments should be looked upon with precise care and their pricing should be the major concerns.
- Making some fixed Financial Policies related to borrowing, lending, investing any amount of money as such.
- A financial manager will make sure that the capital resources which are less in amount are utilized maximum as and when talking about the cost of the investment.
Now let’s talk about some advantages of doing Financial Planning,
- Helps in ensuring that a minimum balance is maintained in the cash outflow and the cash inflow so that a minimum amount of savings is left for future investment.
- Helps in maintaining the stability of the company by eliminating the hindrance to the growth of the company.
- Helps in running growth and expansion programs which in turn help in the overall expansion of the company.
There are various types of planning Financial methods, and thus different ways to approach upon methods of how to save money,
- ? Cash Flow Management
This method just maintains a balance between the cash flow in between the expenses (cash outflow) and the income (cash inflow). In simpler terms, it is basically how you and your family manage their expenses with the total income of the family so that a balance(savings) are left at the end of the month for future investments.
- ? Investment
Another type of Financial Planning is investments. This is the method where you collect all the cash which is left after managing your cash flow and putting it away for a specific time and when in the current time you have zero need for it. The important part of any Financial Planning is how to make your money grow with the least of the efforts put in manually. The point yet to remember while investing is, you should invest as minimum as possible to get the highest return. Planning for future situations is always a good idea.
- ? Savings
Another important method in financial planning is to save for your future expenses. If you are looking to pay a hefty sum or you are going to buy a new house or car then you should start saving a little sum of money every month. But savings can only be done if you are managing your Finances properly. If you are not managing your finances properly then there will be zero savings which mean no future goals accomplishment.
- ? Proper Steps
Good Financial Planning can help with cutting down the expenses and making sure that you will get a balanced profit with fewer risks.
The important steps in Financial Planning include,
- Establishing a plan always helps, whether it's a road map towards your future financial goal or a plan to manage your time. Everything when it works acc to the plan helps. Things to include in your plan,
- Always remember your net worth income, if you want to go somewhere you should be aware of where you are now. Also listing down your income, salary, and assets will help you in getting a rough sketch of what you have and what you want to achieve in the future.
- Prepare your income statement, income statement means how much you are earning and how much you are ready to spend and save for the future.
- Set up your goals, make a brief chart that encompasses the goals you wish to achieve and in how much time you are planning to get that. This might include the various steps which you are ready to take, to achieve that goal.
- Asset evaluation includes evaluating your current assets and comparing them with your future goals which gives us a brief idea of how much more assets you will have to buy or sell, depending upon your goals.
- ? Improved and Logical tax Building
Whether you are a businessman or an ordinary guy, every working person has to pay some amount of their income as tax. Taxation has always played a major role in establishing a proper finance plan. Therefore we should always plan our taxes properly so that they are within legal boundaries.
In the end, I would just like to say that Financial Planning is not easy, but if mastered properly then it's that one skill that can give you the greatest of the benefits in a lesser amount of time. Financial Planning always holds the upper hand when talking about anything, be it purchasing a car after 2 years, or planning your retirement comfortably. Every aspect of life needs cash to be spent on Finances and that is why Financial Planning is equally important.
Ankita Kaushal is working as a blogger for Veronica Karas. Veronica Karas is a Certified Financial Planner in NY. She helps with Complex financial issues like stock options, estate planning, tax & financial planning and more. Get in touch with her now for any assistance regarding Financial planning.