Get That Financial Plan, Now

Doing so helps you clearly identify goals and work to a plan of getting there in your earning years

- Renu Yadav

Most people tend to have a random approach toward personal finance. They either invest whatever is left after spending rather than the other way round. Or they invest in multiple instruments rather than in a product suited to their needs. As a result, they are unable to meet their life goals. Financial planning gives you a bird’s eye view of your future goals, helps you pace your financial journey and enables you to achieve your goals optimally and efficiently. However, while investing is an important aspect of financial planning, a financial plan is much more than just investing. To embark on this journey, you need to do the following:

KNOW YOUR FINANCIAL POSITION

Drawing up a budget is the first step toward financial planning as it gives you a clear idea of your financial position. To make a budget, list your income from all sources, be it salary, rent or interest. Then list all your expenses, including payments of insurance premiums and school fees, which may differ in periodicity, but have to be divided monthly to be added to the expenses for a month. At the end of the exercise, you will find yourself with an investible surplus. You’ll also be able to identify the months you may face a cash flow problem in for which you can prepare in advance. Your expenses also need to be listed under different heads, so that you can delineate discretionary expenses and cut down on them if you need more money to meet your life goals. “If this exercise is not done, then the plan might trigger budget gaps. Pre-planning a budget can help you avoid the need to re-plan,” says Jeevan Kumar, head of investment advisory at Geojit Financial Services.

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