Creating a financial plan could be daunting. It involves several moving parts like income & expense details, future goals, current cash flows etc. However, it is very important to have a financial plan in place to ensure you achieve your goals in a smooth manner.
A financial plan is a comprehensive strategy that helps individuals or families achieve their financial goals. It typically includes an assessment of the current financial situation, identification of financial objectives, and development of a roadmap to achieve those objectives.
Financial plan covers several areas, including cash flow planning, retirement planning, tax planning, risk management, and estate planning. It considers an individual’s current financial situation and provides recommendations on how to allocate resources to achieve long-term financial success. Since it involves a lot of factors, financial planning is a recurring exercise & one needs to keep the plan updated per the situation or life stage.
In this article, we are going to discuss important factors to be considered while creating a financial plan for yourself and your family. Identification of goals: It is important to make a list of goals that you are planning to achieve along with the time horizon to achieve them. Goals could be child education, retirement funds, buying a house etc. Having the goals in mind keeps you on track to achieve them without worrying about markets.
Current financial situation: An assessment of current income, expenses, assets, and liabilities must be done to understand the inflows and outflows of an individual. Inflows can be in the form of salary, business income or income from investments. Expenses could be rent, household necessities, EMIs, school fees etc. All this information must be noted down in a single place & savings should be assessed to invest in for future goals.
