Who requires Financial Planning?
Some individuals might feel that they don’t need to plan or they know their finances better, or don’t have enough money.
However, every person whether poor or wealthy requires Financial Planning like all rich and poor require medical treatment.
Why do individuals and families need to plan their finances?
There are no prevalent large scale social security schemes in India, so responsibility increases to plan for emergency events, health & life cover and retirement provisions.
All sources of money need to be allocated in a prudent and disciplined way towards own needs, wants and other spending requirements.
What is Financial Planning and where we tend to make mistakes ?
When you go to a doctor, he/she diagnoses the patient to understand the problem and then prescribe the medication.
Doctor’s focus isn’t on the medicine (Cipla or Ranbaxy), the focus is on problem and overall health of the patient.
Similarly, financial planner’s role is to understand your financial strengths and threats, and accordingly suggests allocation in each asset class and its product or schemes.
Looking for products first and then trying to fit that product in your life isn’t the right approach. Looking at life first and at a later stage product must be looked at.
What should be our right approach ?
We all do financial planning unknowingly and in a unstructured manner in isolation.
We do fixed deposits, buy insurance policies, invest in stocks and mutual funds, buy real estate and take loans.
Any spending or investment decision that you take certainly impacts your overall financial life.
Financial Planning is considering impact of one decision on another, and utilizing resources in the best possible manner to achieve one’s financial aspirations.