Why financial planning is important
Is earning money enough?
No, it is not. Though the money you earn is important, if you don’t channel it into savings and use it to fulfil your financial goals, it doesn’t fulfil its purpose. Having sufficient corpus to meet your financial liabilities and having financial freedom is what is important. Financial freedom can be achieved if you plan your finances. Here is where financial planning comes into the picture. It is an imperative tool with which you can plan your finances, create the required investments and generate funds for meeting your financial goals. Though experts stress the importance of financial planning, many of you ignore it. Why? Don’t you realize the importance?
If you don’t, here are some points which would help you see why financial planning is important -
Why financial planning is important?
Financial planning is important because of the various benefits it provides. If you have a well chalked-out financial plan you can not only handle your money efficiently, but also save for financial independence. Here are the benefits of financial planning and knowing them you would understand what makes it important –
• You will have a contingency plan
The first step of a financial plan is to have contingency funds. This fund helps you in meeting the financial strain faced in an unplanned contingency. Thus, when you develop a financial plan, you have provisions for meeting contingencies and your financial stability is not threatened.
• It helps in budgeting
A problem which many of you face very often is splurging through your monthly income. Either because of overspending or spending on unaffordable items, you blow a hole in your pockets which threatens your financial stability. This overspending and splurging can be avoided with a well-defined financial plan. Financial planning helps you create a planned budget. This budget gives you a guideline of your income and expenses and helps you save your income.
• It gives a direction to your financial goals
Having a financial plan means having a defined picture of your financial goals. Whether you want to save for your children’s future or for buying a house or for your retirement, financial planning gives you a sense of direction. You understand your financial goals and can save towards their fulfilment.
• You become financially independent
When you have planned your finances, you can meet any challenge life throws at you and deal with its financial implications. You wouldn’t have to depend on anyone to help you. Moreover, since all your goals would be planned in advance, you would have the security of knowing that there would be funds to fulfil your goals at the specified time. This brings in financial independence, something coveted by everyone.
• You can earn tax benefits
When it comes to saving, there are many investment avenues which are tax-saving in nature. However, their tenure and returns vary. When you have a proper financial portfolio you know your goals and their tenure. Based on your financial goals you can pick those investment avenues which help you save tax and maximize your returns.
All in all, financial planning is important. If you want to live a stress-free life in terms of financial security, a well-defined financial plan is required. If you want to meet all your life’s goals head on, a financial plan is required. Moreover, the above benefits are also promised when you have a proper financial plan in place. So, if you have financial responsibilities and you want to achieve financial freedom, resort to financial planning.
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