Need For Financial Planning

In Today’s competitive and complex world, a person has alot of choices for everything he needs like Place of Living, career, savings and investments etc. It is becoming difficult for a person to develop financial strategies that helps in improving his lifestyle. Even availability of sufficient funds worries the individual about his/her future. The best way one can achieve one’s financial objectives is through Financial Planning.Financial Planning helps in defining one’s financial goals and in developing strategies to achieve those goals.

Objectives of Financial planning

Personal Financial Planning can be defined as “Taking conscientious and systematic steps towards fulfilling one’s financial goals”. It refers to the proper planning and implementation of well-coordinated plans to achieve financial objectives. It is a dynamic process. It helps individual deploy scarce available resources in a wise manner.Savings and investments made today have to match the future goals. To make sure that this happens, proper projection of the future needs and evaluation of the future course of

actions become necessary. Planning in financial areas is necessary for the people whether they are rich or poor. If a person has huge cash reserves, he can plan to invest and spend it wisely. Similarly, a person, who has low or inadequate funds, has to plan to get more benefit out of scarce funds.

Example:

•Mr.A, a software engineer, has two kids and a dependent wife. Rohan is

thinking of securing his children’s future. What should he do?

• Mr.B,has just joined a marketing firm. She has to repay her education loan and support her family. How can she make it possible with her small salary?

• Mr.C,received ten lakh rupees from his mother’s estate, on his twenty sixth

birthday. He has no idea what he should do with this money.

All these people are facing a common problem. They face uncertainty over their future financial plans. 

Financial planning is an ongoing process of an individual and systematic analysis of personal financial obligations, funds requirements, available funds, income generation, and allocation of funds on the basis of priority. It leads to better utilization of available financial resources and reduces the financial crisis of individuals. It is a life long activity.


Financial Objectives 

Every person has his or her own financial objectives in life with respect to the career 
chosen, attitude, values, and basic needs. But, the objectives are like

1. Protection against personal risk resulting from:
• Premature death. 
• Disability losses. 
• Unemployment. 
• Property and Liability losses. 

2. Capital accumulation aimed at meeting: 
• Family needs. 
• Educational needs. 
• Emergency needs. 

3. Provision for retirement income.

4. Reducing tax burden: 
• During one’s lifetime. 
• At death – when property is passed on to others. 

5. Estate planning (investing for the heirs). 

6. Investment and property management