DISCLAIMER

Personal financial planning is essential for everyone, regardless of their income or financial status. It helps individuals to achieve their financial goals and objectives by identifying their current financial position and developing a plan to reach their financial goals. Here are some reasons why personal financial planning is important:

·      Sets Financial Goals: Personal financial planning helps individuals set specific financial goals that align with their life goals. It helps to ensure that the individual’s current income is utilized in a way that will enable them to achieve their future financial objectives.

·     Increases Savings and Investment: Personal financial planning helps individuals to increase their savings and investment portfolio. With the right planning, an individual can identify areas where they can cut expenses and increase their savings, thus ensuring financial security in the long run. In finance world reduced expenses are considered equivalent to income earned.

·   Helps in Debt Management: Personal financial planning helps individuals to manage their debts effectively by providing a framework for debt management. This enables them to pay off debts in a timely and efficient manner and avoid unnecessary financial burdens.

·      Seeing the Future with a Clear Vision: When we have fixed a goal, it means we are very much clear about future, and with the help of financial planning, we would be able to follow the steps needed to achieve goal. Without a financial plan, it would be like groping in the dark and everyday managing crisis.

· Assessing the Person’s Risk Tolerance and Develop an Asset Allocation Strategy: While making investment decision individuals risk tolerance capacity is different. Some may be aggressive while others may be conservative. There may be few others who follow hybrid or balance approach while investing. Financial planning helps in finding out the risk bearing capacity of each individual, and on the basis of risk appetite, suitable investments may be made.

·      Helps in Tax Reduction: By proper financial planning one can reduce his or her tax burden.

·   Provides A Safety Net: Personal financial planning can help individuals to prepare for unforeseen events such as medical emergencies, job loss, and other financial emergencies. This provides a safety net and ensures financial security for the individual and their family.

·    Tracking Investment Performance with Respect to Desired Goals: Financial planning is not a onetime exercise. It need regular and constant monitoring of the investment, its performance is reviewed with peer group. In case of any deviation corrective actions are taken at the right time.

·     Providing Peace of Mind: It is said that an individual who borrows without proper planning ends up in a debt trap. When he is unable to pay the debts, he loses his or her sleep and thus peace of mind. Efficient financial planning would ensure that the individual enjoys peace of mind.

·   Improves Financial Literacy: Personal financial planning helps individuals to improve their financial literacy and understanding of financial products and services. This enables them to make informed decisions when it comes to financial matters and avoid costly mistakes.

·     Safeguarding Self and Family at the time of Mishappening: With the help of proper financial planning one can buy term insurance, medical insurance, life insurance and can safeguard him or her and entire family members at the time of sudden death or disability. Thus, financial planning reduces distress at the time of causality.

·   Giving an Individual a Direction: Planning set forth the future vision of an individual. It helps him/her to attain various goals in life.

·  Ensuring Financial Discipline: Proper planning helps one to limit his/her expenses within the budget. It also ensures that planning is done for the various events in one’s life like planning higher education of children, planning to purchase a car or house or enjoying vacation abroad and the money required for meeting them.

In summary, personal financial planning is crucial for anyone who wants to achieve financial security and independence. It helps individuals to set financial goals, increase savings and investment, manage debts, prepare for unforeseen events, and improve their financial literacy.