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Planning is bringing the future into the present

When it is obvious that the goals cannot be reached, don’t adjust the goals, adjust the action steps.

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What is Financial Planning?

Financial Planning is the process of meeting your life goals through the proper management of your finances. Life goals can include buying a house, saving for your child's higher education or planning for retirement. The Financial Planning Process consists of six steps that help you take a 'big picture' look at where you are currently. Using these six steps, you can work out where you are now, what you may need in the future and what you must do to reach your goals. The process involves gathering relevant financial information, setting life goals, examining your current financial status and coming up with a strategy or plan for how you can meet your goals given your current situation and future plans.

The Financial Planning process consists of the following basic six steps:

1. Establishing and defining the client-Planner relationship

2. Gathering client data, including goals.

3. Analyzing and evaluating your financial status.

4. Developing and presenting Financial Planning recommendations and/or alternatives.

5. Implementing the Financial Planning recommendations.

6. Monitoring the Financial Planning recommendations.

How to make Financial Planning work for you?

You are the focus of the Financial Planning process. As such, the results you get from working with a Financial Planner are as much your responsibility as they are those of the Planner. To achieve the best results from your Financial Planning engagement, you will need to be prepared to avoid some of the common mistakes shown above by considering the following advice:

Set measurable goals

Set specific targets of what you want to achieve and when you want to achieve results. For example, instead of saying you want to be 'comfortable' when you retire or that you want your children to attend 'good' schools, you need to quantify what 'comfortable' and 'good' mean so that you'll know when you've reached your goals.

Understand the effect of each financial decision

Each financial decision you make can affect several other areas of your life. For example, an investment decision may have tax consequences that are harmful to your estate plans. Or a decision about your child's education may affect when and how you meet your retirement goals. Remember that all of your financial decisions are interrelated.

Re-evaluate your financial situation periodically

Financial Planning is a dynamic process. Your financial goals may change over the years due to changes in your lifestyle or circumstances, such as an inheritance, marriage, birth, house purchase or change of job status. Revisit and revise your Financial Plan as time goes by to reflect these changes so that you stay on track with your long-term goals.

Start planning as soon as you can

Don't delay your Financial Planning. People, who save or invest small amounts of money early, and often, tend to do better than those who wait until later in life. Similarly, by developing good Financial Planning habits such as saving, budgeting, investing and regularly reviewing your finances early in life, you will be better prepared to meet life changes and handle emergencies.

Be realistic in your expectations

Financial Planning is a common sense disciplined approach to managing your finances to reach life goals. It cannot change your situation overnight; it is a life long process. Remember that events beyond your control such as inflation or changes in the stock market or interest rates will affect your Financial Planning results.

Realize that you are in charge

If you're working with a Financial Planner, be sure you understand the Financial Planning process and what the Planner should be doing. Provide the Planner with all of the relevant information about financial status. Ask questions about the recommendations offered to you and play an active role in decision-making.

Very rarely do people understand what true financial planning really means. Many assume that saving is sufficient for one’s financial plan or when they contribute to a company’s PF plan or when they obtain investment advice on tax saving investments. These are all smaller elements of financial planning. So what is the bigger picture?

SO, WHAT IS TRUE FINANCIAL PLANNING?

Financial planning is a comprehensive, on-going approach that starts with helping you define your aspirations, developing a life plan where you are guided through each step and recommending course corrections along the way, if needed, till the goals are reached. In order to achieve your aim from your Financial Planning engagement, it’s imperative that you are prepared to avoid some of the common mistakes by considering the following advice:

Set measurable goals

A financial plan primary motive is to set specific targets of what you want to achieve and when you want to achieve results. For instance, quantifying the motive like instead of what you want your children to attend ‘good’ schools, you need to quantify what the word ‘good’ means so that you will know when you have reached your goals.

Effect of each Financial Decision

Financial decisions taken by you may affect several other areas of your life. For example, an investment decision may have tax consequences that are harmful to your estate plans. Or a decision about your child’s education may affect when and how you meet your retirement goals.

Periodic re-evaluation of your financial situation

Financial Planning is an ever-evolving process, the goals outlined by you under present conditions may change over the years due to various factors such as a basic change in your lifestyle, inheritance, marriage, birth etc. Re-analysing your Financial Plan periodically may help you stay on track with your long-term goals.

Plan Early

Plan Early to Retire Early, the basic motto behind the art of Financial Planning. People, who save or invest small amounts of money early, and often, tend to do better than those who wait until later in life. Following and incorporating simple habits such as saving, budgeting, investing and regularly reviewing your finances early in life, you will be better prepared to meet life changes and handle emergencies.

Realistic Approach

Financial Planning is a common sense disciplined approach to managing your finances to reach life goals. It cannot change your situation overnight; it is a lifelong process. Remember that events beyond your control such as inflation or changes in the stock market or interest rates will affect your Financial Planning results.

Realize that you are in charge

If you are working with a Financial Planner, be sure you understand the Financial Planning process and what the Planner should be doing. Provide the Planner with all of the relevant information about financial status. Ask questions about the recommendations offered to you and play an active role in decision-making.

“Someone’s is sitting in the shade today because someone planted a tree longtime ago.” – Warren Buffet Financial planning is the process of achieving life goals using different investment options. Financial planning is necessary as it helps you to meet the long, medium and short-term life goals. It is not only monetary, but also helps in fulfilling your dreams. It makes you feel secure and ready for the future.

STEPS IN FINANCIAL PLANNING

Determining your current financial situation.

Developing financial goals

Identifying alternative course of action.

Evaluating alternatives.

Creating and implementing a financial action plan.

Re evaluating and revising the plan.

THINGS TO BE DONE

1.You need to first set aside money as saving and then start investing.

2.You need to maintain emergency fund in case you fall ill or loose job.

3.You need to buy just enough insurance.

4.You need to do goal based planning wherein you invest for specific financial goals which are to be met in the future.

5.You should continuously review and revise your financial plan to remain consistent with your goals.

If you’re not sure with managing your own money, you can consult a financial planner/advisor to do the same. A financial advisor is an expert who will help you in avoiding financial blunder. Share on FacebookShare on Google+Share on LinkedinShare on Twitter

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