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Importance Of Financial Planning

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What is financial planning?

Financial planning is a step-by-step approach to meet one’s life goals. A financial plan acts as a guide as you go through life’s journey. Essentially, it helps you be in control of your income, expenses and investments such that you can manage your money and achieve your goals.

If you take a closer look at the above examples, you’ll find that there is one factor that connects all of them: money. You need to have an adequate amount of money to fulfil your goals and desires. More importantly, you need to have money at the right point in time.

For example, if you want to build up a corpus of Rs. 10 lakh for your daughter’s college education through investments, you need to grow this amount by the time she turns 18. Not a year later. This is where financial planning becomes essential.

What are Benefits of financial planning?

There are numerous practical benefits to financial planning. It helps you to:

  1. Increase your savings
    It may be possible to save money without having a financial plan. But it may not be the most efficient way to go about it. When you create a financial plan, you get a good deal of insight into your income and expenses. You can track and cut down your costs consciously. This automatically increases your savings in the long run.
  2. Enjoy a better standard of living
    Most people assume that they would have to sacrifice their standard of living if their monthly bills and EMI repayments are to be addressed. On the contrary, with a good financial plan, you would not need to compromise your lifestyle. It is possible to achieve your goals while living in relative comfort.
  3. Be prepared for emergencies
    Creating an emergency fund is a critical aspect of financial planning. Here, you need to ensure that you have a fund that is equal to at least 6 months of your monthly salary. This way, you don’t have to worry about procuring funds in case of a family emergency or a job loss. The emergency fund can help you pay for varied expenses on time.
  4. Attain peace of mind
    With adequate funds at hand, you can cover your monthly expenses, invest for your future goals and splurge a little for yourself and your family, without worry. Financial planning helps you manage your money efficiently and enjoy peace of mind. Don’t worry if you have not yet reached this stage. If you are on the path of financial planning, the destination of financial peace is not very far away.

Financial planning for life goals

The importance of personal financial planning in India cannot be ignored. It is not just about increasing your savings and reducing your expenses. Financial planning is a lot more than that. This includes achieving your future goals, such as:

  1. Wealth creation
    The rise in the price of everyday items means that if you want to maintain or increase your current standard of living in the future, you need to create a sufficient corpus of wealth. You may also want to purchase a better car or a new house in the future. All this requires money, and it merely highlights the importance of wealth creation. It is possible to achieve these goals by carefully investing your money in the right avenues. Equity mutual funds can be a suitable option for long term goals. These funds could help  the investor to accumulate wealth in the long run.
  2. Retirement planning
    Your retirement may be 25 or 30 years in the future. But that does not mean you plan for it when you retire. To enjoy a happy and comfortable retired life, you need to start building your safety net right now. Planning at an early stage in life can help secure your future against financial uncertainties. Also, you invest lesser amounts if you start early and gain from the power of compounding which helps to build a large enough corpus over the 25-30 year period.
  3. Child’s education
    Education has become very expensive, not only in India but across the world. And in future, this cost is only going to rise. This is why it is necessary to start planning from the moment your child is born. Calculate how much you wish to earn and start investing in long-term investment avenues that can help you achieve this goal. You can approach a financial advisor for advice if you are not sure how to proceed further.
  4. Saving tax
    Every year, you are probably paying a substantial amount as tax. But you can now lower your tax outgo legally. The Indian Income Tax Act provides various provisions for people to reduce their tax outgo. By planning your taxes in advance, you can identify the best avenues to invest your money and reduce your taxable income. Mutual funds provide a tax efficient avenue for investing for your life goals.

Why personal financial planning is crucial?

To tackle inflation

Remember the time you went to a multiplex with your family. You must have probably heard your grandparents say: ‘Everything was so cheap back then’. It’s true. Twenty years ago, the cost of movie tickets was around Rs. 40, not Rs. 500 as it is today. Similarly, chocolates, coffee, clothes, petrol and other regular goods were much cheaper ‘back then’. This phenomenon of prices rising over the years is known as inflation. It is the steady increase in the price of goods and services over time. And if you are not careful, it can eat into your savings in no time. Here’s a simple example to illustrate its effect.

Imagine a chocolate bar costs Rs. 10 today and you have Rs. 100. With this amount, you can buy 10 chocolate bars. Over the next one year, imagine you keep Rs. 100 in a bank that offers you an annual interest rate of 5%. At the end of the year, you have Rs. 105 with you.

But over one year, let’s assume that the price of the chocolate bar increases to Rs. 11. This means you have to pay Rs. 110 to purchase the same 10 chocolate bars next year. But since you have only Rs. 105, you fall short of Rs. 5. This is how inflation eats into one’s savings. It reduces purchasing power over time, and you have to pay more money to buy the same goods.

You can combat inflation by investing in avenues that offer you better returns over time. But for this, financial planning is critical.

To create a contingency fund

The future is uncertain, and anything can happen at any time. Here’s a scenario that highlights this point.

Imagine a father who has taken an education loan to finance his daughter’s college education. At the same time, he is also saving money to fund his retirement that is a couple of years away. But suddenly, a medical emergency occurs in the family. Unfortunately, the lack of medical insurance coverage means he has to pay for medical expenses out of his savings. This depletes his retirement corpus and increases his financial burden.

Many people face such situations. And while it is good to hope for the best, it is necessary to plan for the worst. A sudden job loss or an unexpected medical emergency can shake up your finances considerably. This is why you need to have an emergency fund to deal with such issues. Financial experts advise investors to keep an amount equal to 6 months’ salary as a contingency fund. This can be invested in a liquid fund so that you can access the money quickly in case of an emergency.

To create a retirement corpus

Newer medicines and more significant advances in the medical field mean that people are now living longer retired lives. This is undoubtedly a good thing. You can enjoy more time with your family, explore your passions and dreams and travel around the world. But there’s one crucial question you need to consider: how can I fund all these expenses? You need to have an adequate amount of money to ensure you enjoy your retired life to the fullest. This is possible by having a financial plan that provides regular income post retirement.

To manage your money in the best possible manner

Satisfying the needs of your family members can be tricky. Your teenage son may want to go to a space camp during the summer while your oldest child is ready to go to college. In personal finance, planning is vital. It not only helps you understand the needs of different family members but also how you can achieve them. But for this, you need to manage your money in the best possible manner.

For instance, parking your savings in a bank account is better than spending all of it. However, this is not the best way to deploy your money.  In comparison, avenues like mutual funds could  provide better annual yields. So, when you identify your family’s needs and make your money work actively to achieve them, you may expect to see good results.

How to create a successful financial plan?

  1. Understand your current financial situation
    Determine the status of your current finances, viz., your income, expenses, debt, savings and investments. This is the first step in financial planning, as it gives you a good sense on the state of your finances and ways to improve.
  2. Write down your financial goals
    Ask yourself: ‘what are the different financial goals I wish to achieve in life?’ Write them on a piece of paper. Don’t hesitate to put down any goal because no goal is too small or too big. However, make sure that your goals are specific. For instance, here are some achievable goals: ‘I want to purchase an SUV worth Rs. 13 lakh in the next 18 months’ or ‘I want to buy an apartment worth Rs. 80 lakh in the next 5 years.
  3. Look at the different investment options
    There are numerous investment options available to investors. In the mutual fund market alone, you can choose from nearly 2,000 schemes. Different investment avenues help investors to achieve different goals. For example, equity funds are suitable for long-term goals like retirement planning, child’s education, etc. If you are interested in relatively steady income and you are risk averse, you may want to invest in debt mutual funds. Equity Linked Saving Scheme (ELSS fund) are good to save tax. When it comes to investing, many financial experts have highlighted the importance of mutual funds. Investing in these funds consistently over a longer period can help you achieve your dreams and goals.
  4. Implement the right plan
    You need to select the right investment option based on factors such as your goals, age, risk appetite and investment amount. If you are unsure on the funds you need to select for your portfolio, you can avail the services of a financial advisor. These are certified professionals who help investors make the right investment choices. They also help with other aspects like insurance, retirement planning, estate planning and taxation.
  5. Monitor your financial plan regularly
    The financial planning process does not end once you invest your money. You also need to monitor how the funds are performing regularly. If they don’t perform, you may need to replace them with better performing funds. You also need to follow your plan because as you grow older, your goals and dreams evolve. For instance, your financial priorities may change after the birth of a child. Now, you need to accommodate the expenses and objectives of a new member in your family.


Benjamin Franklin has rightly said, “If you fail to plan, you are planning to fail.” You may have several different financial goals you wish to achieve but to reach them at the right point in life; you need to have a financial plan in place at a very young age.

जीवन में हर चीज के लिए, ख़ासतौर से फ़ायनांस के लिए प्लानिंग करनी ज़रूरी होती है. फ़ायनांशियल प्लान और कुछ नहीं बस अपनी जोखिम लेने की क्षमता और महंगाई को ध्यान में रखते हुए, कदम दर कदम अपने जीवन लक्ष्यों की ओर बढ़ना है. कोई प्रोफेशनल फ़ायनांशियल एडवाइजर आपके लिए फ़ायनांशियल प्लान बनाते समय आपके जोखिम लेने की क्षमता का सही आकलन करता है, आपके लिए एसेट का आबंटन निर्धारित करता है, ज़रूरत के वक्त की प्लानिंग करता है और फिर उसे अंतिम रूप देता है और प्लान पर समय-समय पर नजर बनाए रखता है. हम जो वीडियो दिखा रहे हैं वो आपको फ़ायनांशियल प्लानिंग का महत्व समझाएगा.

જીવનમાં દરેક બાબત અને ખાસ કરીને તે નાણા સંબંધિત હોય ત્યારે તેની માટે યોજના કરવી જરૂરી બને છે. આર્થિક યોજના એ બીજું કાંઈ નહીં પરંતુ તમારા જીવનના હેતુઓને સાકાર કરવા તમારી જોખમ ક્ષમતા અને ફુગાવાને ધ્યાનમાં રાખીને અપનાવવામાં આવતો સ્ટેપ બાય સ્ટેપ અભિગમ છે. આર્થિક યોજના તૈયાર કરતી વખતે વ્યાવસાયિક નાણાકીય સલાહકાર તમારી જોખમ ક્ષમતાનું સાચું મૂલ્યાંકન કરે છે, તમારી અસ્ક્યામત ફાળવણીનો નિર્ણય કરે છે, તાકીદની યોજનામાં અને અંતમાં યોજનાના અમલ તેમ જ સમયાંતરે તેનું નિરીક્ષણ કરવામાં મદદ કરે છે. આર્થિક યોજનાનું મહત્વ સમજવા આ ટૂંકો વીડિયો જુઓ.

জীবনের সবকিছুতেই, বিশেষ করে যদি সেটি অর্থ সম্পর্কিত হয়, দরকার পরিকল্পনার| অর্থনৈতিক পরিকল্পনা আর কিছুই না, সেটি হল আপনার জীবনের লক্ষ্যপূরণের জন্য ধাপে ধাপে এগনো, ঝুঁকি নেওয়ার ক্ষমতা এবং মুদ্রাস্ফীতির মতো বিষয়গুলি মাথায় রেখে| একটি আর্থিক পরিকল্পনা তৈরি করার সময়, একজন পেশাদারি আর্থিক উপদেষ্টা আপনার ঝুঁকি নেওয়ার ক্ষমতার প্রকৃত পরীক্ষা করেন, আপনার সম্পদ বরাদ্দের সিদ্ধান্ত নেন, আপৎকালীন পরিকল্পনা করতে সাহায্য করেন এবং সব শেষে পরিকল্পনাটির সম্পাদনা এবং পর্যায়ক্রমিক পর্যবেক্ষণ করেন| একটি আর্থিক পরিকল্পনার গুরুত্ব বুঝতে এই ভিডিওটি দেখুন|

வாழ்க்கையில் ஒவ்வொன்றிலும் குறிப்பாக பணம் சம்பந்தப்பட்ட விஷயத்தில் திட்டமிடுதல் அவசியமாகிறது. பண விஷயத்தில் திட்டமிடுதல் என்பது உங்களின் ரிஸ்க் எடுக்கும் திறன் மற்றும் பண வீக்கம் இரண்டையும் கருத்தில் கொண்டு, உங்கள் வாழ்க்கை இலக்குகளை பூர்த்தி செய்ய படிப்படியான ஒரு அணுகுமுறையாகும். பணம் சம்பந்தப்பட்ட திட்டத்துக்காக தயார்படுத்திக் கொள்ளும்போது, ஒரு நிதி ஆலோசனை நிபுணர் உங்களின் ரிஸ்க் எடுக்கும் நிலை பற்றி சரியான மதிப்பீடு செய்து உங்களின் சொத்து ஒதுக்கீடு பற்றி தீர்மானித்து சரிவர திட்டமிடுதல், திட்டத்தை வகுத்துக் கொடுத்தல் மற்றும் அவ்வப்போது அதைப்பற்றி கண்காணிப்பதிலும் உதவுவார். பணம் சம்பந்தப்பட்ட திட்டத்தின் முக்கியத்துவம் பற்றி தெரிந்து கொள்ள இந்த வீடியோவை சற்று பாருங்கள்.