The word financial planning has enormous meaning. Different people can interpret the same in different style. Proper financial planning has a simple meaning that a person must not run out of money whenever a present or future requirement occurring to him or family. In India, especially middle class families are not well conscious about the requirement of a good financial planning. This will put them in trouble with out of money in some circumstances once if they had enough money in their hand.
Accurate financial planning is not a single or simple process. Instead, it involves 3 major phases such as :
· Self Assessment,
Process I: Self assessment :
This is a primary step one has to complete prior to planning his finance. Doing a self assessment make him capable to understand his current wealth status and responsibilities. Following are the things to be covered in the self assessment process.
1. What is your age and
2. What is your main source of income?
3. Who all are your dependents in your family?
4. What are your expenses?
5. What is your monthly savings?
6. What is your current investment status?
7. When you are planning to retire?
One should identify his wealth status proceeding to move with financial planning.
Process II: Planning of finance
Planning requires your attention to lots of areas where possible mistakes can happen and that can cost you. When planning the finance, one must take care of the following points in a greater extend :
1. Self protection and protection of dependents from accidents and medical treatments
2. Securing family and dependents from any future consequences happening to your life
3. Protect your major assets
4. Protect yourself and family from mortgages and loans
5. Meet the unexpected expenses that may occur
6. Plan for your children
7. Plan for your retirement
8. Plan your investments and balancing the same as per your age, risk profile, goals, etc.
9. Financial advisory if required
10. Monitoring your wealth and investment status
Process III: Execution phase of your financial plan
Execution phase required more efforts than the above mentioned 2 phases. Once after completing the same, it is a necessity to monitor the status time to time to understand the status and act as per any action if necessary depends on your life changes or requirements.