Everything you need to know about Financial Planning and it’s Elements

What is Financial Plan?

A financial plan is the comprehensive evaluation of an investor’s current and future financial state.

Everything you need to know about Financial planning and it's Elements

Financial plans are made by using the currently known variables to predict the future cash flows, asset values and withdrawal plans.

Most individuals generally work on their financial plans using their current net worth, tax liabilities, asset allocation and future retirement and estate plans.

These metrics are used with the estimates of the asset growth to determine whether the individual’s financial goal can be met in the future or what are the steps that the individual should take to ensure that they meet their financial goals.

Financial planning is basically the process of meeting an individual’s life goals through proper management of their finances.

The life goal for an individual can be anything such as buying a house, savings up for children’s higher education or planning their retirement.

It also involves gathering relevant financial information, examining ones current financial status and coming up with a strategy or a plan on how one can meet one’s goal with ones current situation and future plans.

Also, a good financial plan will help the investor in realizing what should be the changes they will have to make to reach their financial goals. Financial goals should be quantified and there should be milestones set for tracking.

Through financial planning the investor will get a direction and understanding of their financial decisions and will help them in cutting back on expenses which are not required. Financial planning also help the investor understand how their financial decisions affects other areas of their finances.

  1. Begin financial planning as early as possible:

Financial process is a process which will provide better results when the planning has been started at an early age. Early financial planning will inculcate good habits such as investing, saving, budgeting which will help the customer meet the changes in life and handle emergencies easily.

  1. Realistic approach:

Financial planning will not change the customers situation overnight, it is a long process which requires a lot of work and a disciplined approach for managing the finances. Thus, the customers should have a realistic approach.

Image: Pixabay

About Author

Rakesh Seth is an finance blogger and  he love to write about business ideas, finance tips and planning. He runs Karvy Wealth, a wealth management company.

Also Read: Top 30+ Highly Profitable Consulting Business Ideas in Nigeria

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