Why Financial Planning 

Can you manage without financial planning? Many people do, but they may find - often when it’s too late - that they missed the bus and that they don’t have the means to achieve their life goals. 

Consider this survey of persons who started working at the age of 25 and retired at the age of 65 which threw up very interesting statistics:  

All of us, as human beings aspire to be rich and famous like Bill Gates or the Ambanis for that matter. But do all of us succeed? Probably not, going by the statistics of the millionaires and the billionaires in the world compared to the Aam Aadmi, whether in India or the rest of the world. Nearly 86% of the respondents in the survey had no proper financial planning and that is the precise reason that they had to, not by choice, but by force, to continue to struggle or depend on children or charity. After all, there is a saying that beggars can't be choosers.

It is said that If you fail to plan, you are planning to Fail. That is what happens to 86% of the people in the world, the percentages varying, whether it is India or any other country for that matter. The lower end of the population is always poor, just because they did not have the adequate resources, or in spite of the resources, they did not utilize it properly.

With the channging demographics in the world, people today realize the importance of living life to the fullest. Consequently, many opt for early retirement from full time jobs, as compared to a few decades ago, when most people worked until the maximum retirement age of 58-60 years and instead go into business for themselves where there is no retirement age. 

Another important aspect is that with the advancement in medical science, the average person can, today, expect to live a healthy life well into his or her seventies or eighties, which means that retirement life is almost as long as working life. Financially, it implies that savings (after taking into account the twin villians of inflation and taxation) should be enough, not just to maintain the same lifestyle for almost 25-30 years, with no new income, but also to take care of medical expenses, which are usually high as the person gets older. Planning for all this is a tall order for anyone. That’s why it’s critical for everyone to plan their finances from an early age. 

Benefits of Financial Planning 

Here’s a list of the benefits that a well chalked out financial plan can bring about: 

• Helps monitor cash flows and reduces unnecessary expenditure.
• Enables maintenance of an optimum balance between income and expenses.
• Helps boost savings and create wealth.
• Helps reduce tax liability.
• Maximizes returns from investments.
• Creates wealth and ensures better wealth management to achieve life goals.
• Financially secures retirement life.
• Reviews insurance needs and therefore also ensures that dependents are financially secure in the unfortunate event of death or disability.
• Lastly, it also ensures that a will is made.