WHAT IS FINANCIAL PLANNING?

Financial Planning for you and your family means realising your dreams in a structured way. With expert advice, robust products and organisations that have the solidity and depth to service your needs over a lifetime.

How does financial planning work?

Let’s take an example.

Let’s say you are planning a small party, for which you decide to do the cooking yourself. How will you go about it? You start by deciding which items you will serve – for snacks, dinner and dessert. Then make an exhaustive list of the ingredients required to prepare these items. You will compare this list with the ingredients you already have at home. The balance is what you need to buy. After taking the required money from the household kitty or withdrawing from the bank you set off to buy the ingredients. Then, depending on the time that each dish requires, you start preparing the dishes, in such a way that all are ready in time for the party.

Financial Planning is a similar, step-by-step process.

You first identify your financial goals (for example, sending your son abroad for further studies). Then you figure out how much money you would need to meet those goals (say, Rs. 20 lacs) and how much time you have to do so (say, 10 years). Next, you check how much money you already have as savings (say, Rs. 5 lacs). This means that you need to raise an additional Rs. 15 lacs in order to finance your son’s education. Depending on the risk you are willing to bear, you must calculate exactly how much you should save every year and where your savings need to be invested so as to raise the additional Rs. 15 lacs in 10 years. This entire process is called financial planning. It is a structured process that calls for commitment, discipline and expert advice.

Financial planning can be undertaken on your own but it is easier with professional guidance. Whichever you choose, one thing is for sure: financial planning provides a clear direction towards achieving your goals. Without a structured plan in place, you may tend to splurge your money on relatively unimportant needs, thus preventing you from achieving your bigger, long term goals. Planning also protects you from inflation. Let's say you have a dream to visit Europe when you retire, which is five years from now. A month long trip for two to Europe currently costs Rs. 5 lacs. But five years hence the same trip may cost double. Without proper planning, you could end up keeping aside just Rs. 5 lacs for the vacation of your dreams, and realise too late that your savings were not enough. A good plan takes into account the potential rise in prices and ensures that inflation has no impact on your dreams. All in all, financial planning takes care of your future.

All in all, it lets you enjoy something that money cannot buy. Peace of mind!