Why You Need A Financial Plan Even Before You Start Investing

Make financial planning the starting point to navigate through various life stages on the way to reach your goals no matter how uncertain the journey is.

- Sanjeev Puri

When stock markets swirl, most investors get worried about their investments. Does all this market action require you to rejig your investments? For most of those who are into chasing their goals, markets and its movements are irrelevant. The fear of losing money comes to mind if there is no financial plan in place. For all others who have a financial plan in place, the uncertainty and volatility attached with stock market are immaterial and largely accounted for.

Most of us treat investments as an all-inclusive deal to meet their goals. However, investment planning is only a part of the larger process called the financial planning. Financial planning may be defined as, “The process of meeting life’s goals through proper management of finances.” Without a proper financial plan in place, one should not venture out in searching and investing in different products.

Most of us might not be financially savvy. We won’t even have a plan to meet short-medium-long term goals. In the absence of a plan, the expenses incurred or the investments, both are largely on ad-hoc basis. Withdrawals from existing investments at the time of need could happen towards household or big-ticket purchase thus jeopardizing long term goals.

For many of us, buying and selling of MF units based on market conditions and thus trying to time the market happens. This is mainly because no earmarking for funds is there. If goal is longer, and funds are set aside irrespective of market conditions, the investments will continue, and client won’t break investments.

Make the right start