What is Financial Planning ?

Introduction :

In today’s world hardly anyone can live their life without financial planning. We all do financial planning in our life whether it is about managing monthly grocery bills , paying credit card bills ,Investing in Mutual Fund or Equity Market irrespective of education background. However important part is to have structured approach towards planning using concept of Personal Finance . Objective of this post is to give you step by step guidance with separate chapter on each component .

What is Financial Planning?

Financial Planning is a process of managing one’s finance to achieve life’s financial goals. Financial Planning is very wide term and use for both corporate and personal finance. We are here discussing about personal finance . This includes Income, Expenses, Assets and Liabilities . Your life Goal can be buying car or expensive mobile, buying house, education , marriage or world tour . Proper planning is required to achieve these goals as per your defined timeline.

When Should I Start Financial Planning?

I think it starts from the day when you receive your first pocket money. You plan whether to buy ice cream or spend on toys or whether to spend on party in case of teenager . When you start your first job or business , it is better to have financial planning habit from first month. You should have your spreed sheet ready in your desktop or laptop which is having details about your opening balance in cash & bank ,credit cards, income earned during the month , expense during the month and closing balance of Cash & bank balances and credit card.

Who Should Do Financial Planning?

You can take help of Chartered Accountant or Certified Financial Planner for Financial Planning . However it is not possible to do it without your own involvement in each step. You should know where you spend each rupee ,what is source of income and how much you are saving each month . I have seen cases where people keep their money in saving account without bothering to invest in any good financial product . Now a days , one is earning hardly 3% interest p.a. on saving balance . Accumulated interest on this idle balance exceeding Rs.10,000 are taxable upto 30% plus Surcharge and cess (Based on individual tax slab). Deduction is available only Rs.10,000 u/s 80TTA of income tax Act on saving account interest.

Key Elements :

Good planning helps you to prepare good plan . It will give you clear road map regarding your monthly investment in appropriate asset class as per your risk profile and financial goal. Key Element :

  1. Money Management
  2. Investment Planning
  3. Risk Analysis  & Insurance Planning
  4. Retirement planning & Employee Benefits
  5. Estate Planning
  6. Tax Planning

Conclusion:

Each element listed above required detailed discussion. You will get detailed ideas on each topic in coming posts. Personal Finance journey starts with financial planning followed by plan with actual road map and executing this plan in order to achieve your life’s Financial goal.

Author

    by
  • CA. Kalpesh Karia

    CA. Kalpesh Karia is a Fellow Chartered Accountant . He founded and developed this blog ' FinanceFriend.in ' in 2012. He regularly posts articles related to finance and taxation on his blog. As the name suggests, he is trying to be a Finance Friend and wants to give back to society what he has learned over the years. He shares knowledge based on his 18 years of experiences in areas like Finance, Accounts, Taxation, Forex & Treasury , Wealth Management & Financial Planning, Costing, SAP and Digital Transformation .

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