Financial Planning : Your Guide to Secure Financial Future

 FINANCIAL PLANNING 

Do you feel like your expenses are out of your control?  Are you concerned about inadequate retirement fund? Are you worried or anxious about covering family expenses?  Majority of the people struggle with managing the finance. But don't worry, the good news is that there are resources available for financial plans. By creating a strategic financial plan, you can get complete control over your finances and reach your finance goals.

WHAT IS FINANCIAL PLANNING?

Financial Planning is the process of creating a well planned comprehensive strategy to manage a person's or whole family's finances effectively. It involves deep analyzing of : income, debt, cash flow, emergency fund, estate plan and few other components.

KEY COMPONENTS OF GOOD FINANCIAL PLANNING : 

1. SETTING UP FINANCIAL GOAL

For a good financial planning you need to setup a  financial goal, which means you should be clear about what you want to achieve with your money. Financial goal can be anything like paying off complete debt, buying a house/property , resolving student loan debt, funding a vacation or anything.

 It can be a short-term, mid-term or a long-term depending upon the time duration in which you want to achieve that particular financial goal.

2. BUDGET AND CASH FLOW MANAGEMENT 

A budget is a plan for how you will be spending your money, whereas cash flow management is the process of tracking your income and expenses to make sure that you have enough amount of money to cover your all expenses.

CASH FLOW =  INCOME - EXPENSE 

Split your monthly cashflow into four weeks. Split your income into 4 for each week. If each week your cash flow is positive after expense then you can add up to the next week income, which means you have enough  income. If in case it is negative then it means your income isn't enough.

3. DEBT MANAGEMENT 

Debt management is an important component in financial planning. It can help in reducing monthly payments, save money on interest paid and improving your credit score. High interest paid on credit-cards and personal loans will make you pay high interest.  

For example: Pay installments in 9 months if you were supposed to pay it in 12 months, it will reduce the interest amount. For a better debt management you need to consult a financial advisor near you.

4. RISK MANAGEMENT  & INSURANCE

Risk Management is also an important key component of financial planning. It helps you to protect your assets and income from various risk such as job loss, medical emergency, natural disaster  (earthquake, landslide, flood etc) or a pandemic. Insurance will help you to mitigate against these kind of losses. 

You can protect yourself with these insurance policies:

• Health Insurance

• House Insurance

• Auto Insurance(Vehicles)

• Life Insurance

• Disability Insurance

5. INVESTMENT PLANNING

Investment Planning can help your wealth grow and reach your financial goal bit more fast. However you need to do potential risk while doing certain investment planning. It is necessary to do a research on risks and benefits of each investment before you invest your money. 

Investment options available are :

• Stocks

• Mutual Funds

• NFT's

• ETF's

• Crypto Currencies

Points to remember while doing investment:

• Stat investing during early career, it will be risk free and the more early you invest the more you grow.

• Invest regularly and do investment in different category, it means small diversify based investment.

• Be disciplined, even if the market is low

6. RETIREMENT PLANNING

Retirement Planning will help you to ensure that you have enough money to live a rich and  prosperous life after your retirement. Try to save at-least fifty or sixty percentage from your  present income. Because the commodity price will rise tremendously however your savings won't grow much if you haven't invested good before retirement. Also Medicare expense's won't be covered after retirement until you are a government employee.

There are various pension funds and pension schemes offered by government which will benefits after retirement. Also make sure to invest more money in your pension funds during working days since you will get interest on your pension funds.

7. PASSIVE INCOME

It is an additional option in financial planning for those people who got extra skills and time. There are many part-time jobs or side hustles which a person can do in-order to generate passive income. Some side hustles may even generate more income than your regular jobs.

Few passive income or side hustles are:

• Blogging (YouTube or Article Writing)

• Freelance Content Writing

• Resume & Cover Letter Writing

• Logo Design

• Data-Entry Works

• Affiliate Marketing

Some of the trusted websites for passive income are:

• Freelancer

• Fiverr

• Upwork

8. ESTATE PLANNING

Estate Planning  is the process of arranging for the distribution of your assets after your death. It helps you to ensure that your assets and wealth are distributed according to your wishes among your loved ones. 

For a better estate planning you can create a will, which is a legal document that states how to distribute your assets/wealth after your demise. Also you can setup a trust, a legal entity which can distribute your assets/wealth according to your wishes.

CONCLUSION

Financial Planning is a long-term process, you should be well disciplined to achieve your financial goals. It often includes working with financial planners and consultants who can provide expertise and guidance tailored to individual based upon their financial situation. 

Some additional tips for a good financial planning are: 

• Be realistic : Don't set too much complex plans which is beyond your limit

• Be Flexible : Make sure to be flexible with your plans, since your financial condition may face ups and downs

• Be Positive : Be Positive, no matter what. It might be challenging but you need to have a positive approach since financial planning is something which will benefit you for long term.