Different Types of Financial Planning Process
A Goal based investing approach is essential before you start with Financial Planning. As your planning will need a destination.
What is Financial Planning Process?
Financial planning is a complicated process of sourcing finances, assessing your financial needs, calculating the risk factor, and coming up with a plan to achieve your financial goals.
What is a Financial Goal?
Financial goals can be saving enough money for retirements, planning on taxes, starting a new business and other personal finances. These are your goals that matter to you the most.
We will try outlining some of the most important financial planning strategies and models that one should start thinking about by examining them in more detail.
1. CASH FLOW PROJECTION
- Planning for your daily expenses can be one of the most important things you can do.
- Forecasting short-and long-term expenses with inflation adjusted cost is what a cash flow projection does.
- Sometimes, though, emergency expenses in short term may not only impact your current financial lifestyle but can even create a dent for a lifetime.
- Hence, we as Financial Planners take extreme caution in our planning so that your cash flow is in order.
2. INSURANCE PLANNING
- Adequate Insurance coverage for life, health and motor are the security shields in any financial plans.
- When it comes to unforeseen situations, if you didn’t plan your coverage well in advance, it can ruin your financial plans.
- Health Insurance coverage should match the inflated medical cost.
- Life Insurance coverage should not only provide sufficient amount to your family in your absence but cover any liabilities you have.
- Motor Insurance cover is mandatory as per law, if you own any vehicle.
3. RETIREMENT PLANNING
- Planning for retirement makes sure you have enough savings to take care of your daily expenses, medical costs and other expenses when you do not generate income from work.
- Planning for retirement should be done much earlier as this is a long term goal which usually is mis-interpretated as a short term.
- Calculating the future value of your present cost of living using inflation adjusted returns and total life expectancy is what a Qualified Financial Planner would suggest.
4. WEALTH CREATION
- A Wealth Creation plan is often associated as “Plan for Financial Freedom”.
- Financial Freedom means that you have enough money to pay the living expenses for the rest of your life without having to be employed or dependent on others. This is the ultimate financial success one can aim for.
- This is a goal which a Financial Planner recommends when you are young and can take a higher risk for higher returns by investments in market risk products. Selecting a Diversified Multi-Asset Portfolio with regular Rebalancing is essential in wealth creation.
5. TAX PLANNING
- Tax Planning requires complete knowledge of tax laws.
- Knowing the tax exemptions on selected investments and various other deductions may help you save some money paid towards taxes.
- At times, a Tax Advisor may even recommend you to pay Advance taxes which may be wise if you want a lower tax burden in next year.
- Tax Planning forms a very essential part of businesses as have to comply with several tax policies which can have legal implication.
6. ESTATE PLANNING
- Creating a succession plan protects your assets and properties, as well as your wishes for how you would like them to pass from one generation to the next.
- Documents like this are essential as they describe your wishes and indicate who will carry them out upon your death.
- Mode of Succession is important to know – whether you want a will written or via Trust, Power of Attorney, Beneficiary Designation or other.
Conclusion:
One must inevitably start thinking about short-term and long-term financial goals at some point in one’s life. To achieve the financial goals in life, one needs to draft and implement various types of financial planning.
Invest safely and wisely. Wishing you a prosperous future ahead!
