Financial
planning is the process of meeting your life goals
through the proper management of your finances. Financial
planning helps you make advance provision for financial
needs that will arise in the future. The objective
of financial planning is to ensure that the right
amount of money is available in the right hands at
the right point in the future to achieve an individual's
life goals.
Financial
planning provides direction and meaning to your financial
decisions. It allows you to understand how each financial
decision you make affects other areas of your finances.
For example, buying a particular investment product
might help you save adequately to finance your child’s
higher education or it may provide enough for a comfortable
retirement. You can also adapt more easily to life
changes and feel more secure that your goals are on
track
A
financial planner is someone who uses the financial
planning process to help you determine how to meet
your life goals. The key function of a financial planner
is to help people identify their financial planning
needs, their present priorities and the products that
are most suitable to meet their needs. He or she normally
possesses detailed knowledge of a wide range of financial
planning tools and products, but his major role is
to help clients choose the best products for each
need. The planner can take a 'big picture' view of
your financial situation and make financial planning
recommendations that are right for you.
Some
personal finance software packages, magazines or self-help
books can help you do your own financial planning.
However, you may decide to seek help from a professional
financial planner if:
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you need expertise you don't possess
in certain areas of your finances. For example,
a planner can help you evaluate the level of
risk in your investment portfolio and revise
your asset allocation
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you don't feel you have the time to
spare to do your own financial planning; |
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you know that you need to improve your current
financial situation but don't know where to start; |
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you feel that a professional adviser
could help you improve on how you are currently
managing your finances; |
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you have an immediate need or unexpected
life event such as an inheritance or major illness; |
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you want to get a professional opinion about the
financial plan you developed for yourself. |
A financial planner works for you. His or her loyalty
should be to the client, not the product (s)he is
trying to sell. The financial planner should be in
a position to provide you with unbiased advice and
recommend products that match your needs and are the
best performing ones available. Look for any affiliations
of the financial planner to any product manufacturer.
Until unless the financial planner is truly independent,
(s)he will not be able to give you objective advice.
Create
a budget. Determine what you actually spend each month.
There are fixed expenses like rent, loan repayments,
etc. every month about which we can do little. The
variable items such as food, clothing and entertainment
are often what get away from us. Use your discretion
to contain these variable expenses to start saving.
It is hard to apply a rule of thumb toward savings,
because it varies with age and income level. Ten percent
is a good start. If you find that is too high for
you, don't let that deter you. You can start by putting
a little aside each month and then slowly increasing
it.
Financial
planning is a common sense approach to managing your
finances to reach your 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.
Consider a visit to your doctor. Without complete and
fully accurate details, your doctor cannot prescribe
the best course of action. The same applies to financial
planning. In order to obtain the best service for your
'financial health' all details and specifics must be
disclosed.
Typically,
information regarding investments held, number of
dependants, income and expenditure details, savings
and financial planning needs, etc. The more accurate
information you give, the better the quality of advice
given.
A
financial plan should include a review of your net
worth, goals and objectives, investment portfolio,
cash flow, investments, retirement planning, tax planning
and insurance needs, as well as a plan for implementing
your goals.
Evaluating
your insurance needs is part of personal financial
planning. Insurance takes care of your unpredictable
needs and as these needs can arise at anytime, insurance
is extremely important. Investments take care of your
predictable needs and ideally should follow after
your unpredictable needs are first addressed. The
insurance industry has changed a great deal over the
past few years and there is a whole array of new products
from LIC as well as private insurance companies.
It is important that financial plans are tax efficient.
The financial plan should help you in minimizing your
tax liability and also maximizing your after-tax returns
from your investments. Some financial planners help
their clients in preparing and filing their tax returns.
The best plan is useless unless it is put into action.
Your financial planner will assist you completely in
implementing the plan, if and when, desired by you
It
is good to review the plan when there is a lifestyle
change such as marriage, birth, death or divorce.
Any change in financial position should be evaluated
as well. Most people have an annual update that reviews
how the plan is being implemented. The review also
considers changing goals and circumstances.
That
depends upon what you need. We have provided a questionnaire
for you to fill up. Based on your responses, we will
be able to prepare a financial plan customized for
you. If you require a more detailed session with a
financial planner, please call Sukant Dangwal at (011)
26418903-06, or fax (011) 26476638 or email at sukant@mybajaj.com
