Financial Planning

What is it?

In general a Financial Plan is a comprehensive evaluation of an individuals current income and future financial state. 

It involves predicting future incomes, withdrawal plans and aims to provide a plan to match income, savings and expenses for a desired standard of living. 

It often includes a budget which organises an individual's finances and sometimes includes a series of steps or specific goals for spending and saving in future.

Goal Based 

Financial Planning can also be goal based - whereby it is a step by step approach to meet one's life goals.  It acts as a guide as you go through life's journey. 

Essentially it helps you to be in control of your income, expenses and investments such that you can manage your money and achieve your goals.



Benefits

  1. Better standard of living
  2. Be prepared for emergencies 
  3. Attain peace of mind 
  4. Increase your savings
  5. Gets you out of debt in a better manner
  6. Gives and idea about - How to manage income
  7. Ability to better tackle inflation (price rise) 
  8. Ability to choose the right investments options 
  9. To arrive at the right Asset Allocation
  10. Helps you to better plan your taxes 

Highly Personalised 

A financial plan is a highly personalised document.  
  1. It considers individual priorities.
  2. It reflects individuals family situation, risk tolerance and future expectations. 
  3. It is a part of an individual's view about his and his family's future.


Start of the Financial Plan 

Financial Plan's don't have a set template.
However a plan starts by calculating a person's (an individual's) personal net worth and cash flows. 

This in some sense determines "where u are".  If one can define "where u want to go", then the planning of a journey (a plan) can be thought through.




Then the following elements should be addressed in a Financial Plan and revised from time to time.
  1. Retirement Strategy 
  2. Comprehensive risk management 
  3. Long term investment plan
  4. Tax reduction strategy 
  5. Estate Plan 
  6. Intergenerational Transfers plan 
  7. Asset Protection Plan 
(Disclaimer : This blog is for information purpose only)