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What Is the Scope and Importance of Financial Planning in India?
source: timesnownews
What Is Financial Planning?
Financial planning is described as the host of activities required to assess the capital needed for sustaining different life goals. Both companies and individuals must achieve proper financial planning by procuring optimal income, spending within budget and making various investments.
What Is the Scope of Financial Planning in India?
Financial planning covers multiple aspects of personal money management. Refer to a few of them in the list below:
1. Investment Planning
Investments make up one of the core elements of a financial plan. The financial experts recommend where to invest and what your approach towards the market should be by evaluating your goals and assessing the permissible risk factor.2. Tax Planning
In India, if you are aware of various tax regulations stated under the Income Tax Act, you can take advantage of tons of tax benefits legally. Therefore many hire a financial planner who looks for opportunities for tax exemptions so that their client needs to pay the minimum possible tax amount.3. Risk Management
Considering the large volume of uncertain events we may encounter in today’s fast-paced life, insurance policies are the need of the hour in 2023. When choosing the right life insurance or specific assets that require insurance coverage, a financial planner may come to the rescue and make the right decisions on your behalf.4. Retirement Planning
A stress-free retirement period is all we desire after spending most part of our life working with strict discipline. Many in India fail to fulfil this dream despite several effective investment instruments like APY, NPS, PPF, etc. being available in the market. To ensure you make the most out of these schemes, a well-defined financial plan addressing the post-retirement capital requirement is necessary.5. Estate Planning
Distributing your estate among the rightful heirs calls for decisive financial planning to avoid family disputes. A responsible financial planner will issue a will on your behalf and frame its terms as stated by you to execute the whole asset handover process smoothly.What Are the Objectives of Financial Planning in India?
You can fulfil the following objectives while working in close association with a financial planner:
- Determine Financial Standpoint: An expert in this field will help you frame a precise idea regarding your present financial status. While defining this, your advisor will consider all your outstanding liabilities besides calculating the income.
- Assess Capital Needs: This step is linked to the first one. As the financial plan summarises the estimated expenses, it becomes easy to note down long-term and short-term capital requirements that would beat inflation.
- Issue Monetary Policies: Here, you decide how to perform credit control, when to shift allocated funds to safer investment instruments, what insurance products to buy, etc.
- Ensure Proper Utilisation of Available Resources: A financial planner strives to look for opportunities to deploy your least utilised resources to generate the best possible ROI.
What Is the Importance of Financial Planning in India?
You need to realise the importance of financial planning if you ever thought about making a budget and living life accordingly. Here, we have discussed them in brief to help you make better investment decisions.
- Initiation and periodic revision of financial planning help eliminate uncertainties which would otherwise restrict growth opportunities. Precise long-term vision allows you to make bold moves without worrying about short-term consequences
- A financial plan drawn under expert guidance ensures adequate funds are available to fulfil milestone needs and wants. For instance, when planning to have a kid, you can start saving for their educational expenses and invest likewise to allow the money to grow over time.
- Consistent stability in the standard of living is a major significance of financial planning. By implementing principles of financial planning, you are able to roughly predict cash inflow and outflow, which in turn can help you reduce dependency on various credit facilities.
- Corporate firms must opt for regularised financial planning services as it helps them to assess a perfect time to launch expansion programs.
- Again, financial planning is beneficial for companies as it helps in discovering their relationship status with partners and suppliers. Too high debt ratio or a disrupted cash flow automatically indicates something is wrong in the system, and it needs to change soon to avoid a financial crisis.
What Steps Are Covered in the Financial Planning Process?
Any composite financial planning process must cover the following steps to formulate an ideal roadmap ensuring your financial wellness:
Step 1: Judging the present financial condition
Step 2: Finalising the risk endurance limit
Step 3: Setting both short-term and long-term measurable goals
Step 4: Diversifying investments as a part of contingency planning
Step 5: Monitoring the plan and making necessary changes
As we can confirm now, the necessity of financial planning is vast in India, and its emphasis is growing steadily as financial literacy has increased. More people now stress the importance of financial planning and head to financial advisors for customised wealth creation strategies. If you are presently in a dilemma on managing your funds, refer to the tips mentioned above to maximise the chances of attaining all your life goals.
FAQs on Financial Planning
What is the importance of a financial report produced by a planner?
This report helps track cash inflow and outflow, allowing you to set more realistic goals. Also, as this document reflects your current financial standpoint, you can spot specific areas where there is a possibility of cutting down expenses.
How does financial planning change a person’s money mindset?
A well-managed financial plan makes you disciplined towards money. As you have a clear-cut monthly budget, you save the projected sum beforehand and refrain from overspending.
Why is financial planning necessary to fulfil long-term goals like a child's education?
Long-term obligations like saving sufficient funds for a child’s education require full-proof planning as many intermediary economic factors vary depending on the overall market scene. So to save adequate funds tackling the market risks, you would need financial planning services.
What are the four factors that influence financial planning?
Factors that influence financial planning include awareness of different wealth building models, social welfare interests, financial inclusion, and mastering personal finance.
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Disclaimer
- This is an informative article provided on 'as is' basis for awareness purpose only and not intended as a professional advice. The content of the article is derived from various open sources across the Internet. Digit Life Insurance is not promoting or recommending any aspect in the article or its correctness. Please verify the information and your requirement before taking any decisions.
- All the figures reflected in the article are for illustrative purposes. The premium for Coverage that one buys depends on various factors including customer requirements, eligibility, age, demography, insurance provider, product, coverage amount, term and other factors
- Tax Benefits, if applicable depend on the Tax Regime opted by the individual and the applicable tax provision. Please consult your Tax consultant before making any decision.