Financial planning is concluding purpose in life’s priorities, an individual’s financial goals, and after considering resources, current life style, risk profile to detail a realistic and balanced plan to achieve those goals.
It is the process, it represents the current financial adjustments before an individual, organization or even a country, in the spending pattern in order to achieve the goal.
Importance of financial planning:
It is essential to plan finances in order to get long term benefits by the assets in hand. Through financial planning, investments are shaped properly and managed.
Cash flow: Financial planning helps in growing the cash flow and checking the spending pattern. The cash flow will be build up by taking measures like prudent spending, tax planning and careful budget.
Capital: An efficient financial planning helps to build the a strong capital base. So people can think about investments and their financial position can be improved.
Income: Income is managed efficiently by financial planning. Managing income will help in dividing the income in to savings, payments and other monthly expenditures.
Investment: Financial planning helps in selecting the right investments. It helps the person to achieve his objective.
Financial understanding: Planning will help to understand about current financial position.
Through the financial understanding an individual can do adjustments in investments and evaluating a retirement plan will become easy.
Assets: It is important to determine the value of assets. Knowledge of canceling of settling the liabilities, comes by understanding of finances. The overall process helps to construct the assets, not to become a burden in the future.