What is Financial Planning
Financial planning is more than budgeting, saving or having the perfect investment strategy. Financial planning is a process that sets you on a course toward achievement of your personal goals, needs and priorities through the proper management of your financial affairs.
Some people claim that money isn’t important, yet most of us spend at least 45 to 55 hours a week working for money. The simple truth is that to fulfill our desires and needs we need money. Thus, the sooner we take control of our finances, the sooner we can start putting them to good use, which will improve the quality of our lives. For some people financial planning may simply mean “Cash Flow Planning”, for some it may be restricted to “Tax Planning”, other may think that financial planning is about investments keeping in mind the tax planning issue.
But the simplest and most proper definition of financial planning may be as follows: “Financial planning is the process of meeting life’s goals like buying a house, saving for child’s education or planning for retirement through the proper management of finances.” [As per CFP Board of Standards, Inc]
Benefits of Financial Planning
Financial planning can achieve the following for an individual
- Organize their finances
- Improve cash flow
- Lower personal income taxes
- Plan for retirement
- Plan for education expenses
- Improve investment performance
- Lower investment risk
- Reduce insurance cost