It often happens that financial planning takes a backseat. Read on to know why it’s an absolute must and can’t be ignored.
Due to sheer lack of knowledge, financial planning is not considered a necessity. When asked what they think of financial planning, most people are of the impression that only those with a vault like Harry Potter’s need money management. Some of us have been living from pay check to pay check, and a few others think that financial planning is an expensive process. However, financial planning is essential for a solid financial footing. Even teenagers must step into adulthood with a basic understanding of financial health.
So exactly is Financial planning? For the not-so-finances-savvy, it is the process of meeting your life goals through proper money management. Your life goals can include buying a house, saving for your child’s higher education or even saving for retirement.
Financial planning lays the foundation for a strong financial future. Ideally financial planning should take off as soon as you start earning, or at least a few years later, when you begin setting goals for yourself. It can be done with assistance from financial planners or even on your own. In either cases, consistency is key.
Additional Reading: Crucial Financial Planning Tips For Single Mothers
To realize your goals tomorrow, your finances today have to be in place. Financial planning can work when you follow simple tenets of managing your money such as budgeting, building a contingency fund, investing and saving for retirement.
Confused about when to begin? Start now if you haven’t already. Here are some situations that cannot be taken lightly and signal the need for financial planning.
Additional Reading: Financial Planning For Your Kid’s Education
Kabir Sharma, a tech consultant says, ‘I withdrew cash from my Credit Card account to pay the down-payment for my car’. While there’s nothing wrong with withdrawing money from your Credit Card, typically it comes with an interest.
Goals like purchasing a car or a two-wheeler are quite common these days, and there are a number of Car Loans and Two-wheeler Loans to help you. However, goals like these represent high-budget purchases and need to be planned months in advance. As all loans require certain amount to be paid as down-payment, generally 20% of the total cost, it’s wise to save up on the down-payment to ease the burden of interest. The right way for Kabir would be to plan and save the amount required for down-payment beforehand.
Did you know that using a Credit Card responsibly is one of the surest ways to fetch a Credit Score above 700! Just pay your Credit Card dues in full and on time and you can increase your chances of loan approval!
Additional Reading: Financial Planning For Homemakers
Sreemoyi Basu, a corporate professional based out of Calcutta says, ‘When my father was hospitalised 6 months ago, my friend helped me with all the expenses’. Of course a friend in need is a friend indeed. However, this is why we keep emphasising on setting up an emergency fund or buying Health Insurance. One of the basics of sound financial planning is saving up for your emergencies and being insured.
Your emergency fund should be sufficient for meeting at least 6 months of your expenses. This will help you tide over emergencies such as a temporary loss of job, medical emergencies or any sudden financial requirements. Also, never skip Life Insurance when you’re planning for your future.
Additional Reading: Financial Planning Tips For Parents With Special Needs Children
‘I can forego my savings to buy a swanky flat’, says Ayush Jain, a business man based out of Mumbai. Ever heard your grandparents insist on saving up? Well, having a savings fund is one of the surest ways to ensure that your future is safeguarded.
If purchasing a house comes at the cost of your savings, it’s clearly not the right decision. Money management requires that you set goals according to your current or expected income and priority of the goal. The wise thing is to go for a Home Loan, with rates starting at just 8.7%. This will allow you to pay off the loan in equated monthly instalments (EMIs) and at the same time, build a savings fund.
Additional Reading: 5 Financial Planning Tips For Working Women Above The Age Of 30
These are some of the instances that reflect the need for money management. Be it your retirement, your kid’s education and marriage, a brief sabbatical from work, or fuelling your entrepreneurial dreams, rest assured that with financial planning and proper execution, achieving your goals should not be difficult at all. Happy financial planning!
If you’re on the lookout for financial products, we’ve got everything under one roof.