What is Financial Planning ?
Money, represents purchasing power – something, that enables us to pay for goods and services. The act of saving is equivalent to deferring purchasing power. However, merely saving money does not protect purchasing power. With inflation, the purchasing power of your savings, gets reduced. Carefully planned investments help us to protect the purchasing power of our savings and even grow them over long periods of time.
Financial Planning is an exercise that enables us to be financially prepared for facing different situations and stages in our lives – both foreseen & planned events or unforeseen & unplanned events or situations. This is purely based on the perspective of expenses that we may need or want or even aspire to incur. This covers the various aspects of liquidity management, savings & investments management, risk management, goals planning and estate planning.
Why everybody needs Financial Planning ?
Everybody needs Financial Planning. Whether an infant, a student, a home maker, a wage earner, a business man, a professional or a retiree, married or an unmarried person, everybody needs money for expenses. If one does not plan, the money in hand will always seem less than sufficient.
Observe your expenses and you’ll know that all of us at different times end up making needless expenses on trivial stuff but are yet struggling in meeting the big goals of owning a home, a good education, a dream vacation or contributing to deserving charities.
Do you have a Financial Plan ?
You may have lots of insurance policies, investments in real estate, gold and mutual funds and shares and money in the bank.
Does that mean you have a Financial Plan? The answer could be in the negative, unfortunately.
Let’s take the example of India. We all know, India is a rich country. If you have any doubts, I am sorry to say, you are ill informed.
Now every year, during the annual budget exercise, there are plenty of discussions in the media about how the Finance Minister will meet the challenges of financing investment for development and infrastructure and yet keep the budget deficit within acceptable limits?
This issue may not have cropped up at all, if the biggest share of the government’s expenses was not spent on servicing debt and other revenue expenses.
It is similar to saying that out of your monthly earnings, a very large amount is spent on paying EMIs and meeting regular household expenses, leaving little for spending on your kid’s present and future education and your retirement savings (all investments for the future)!
Incidentally, India also has the highest amount of gold owned by individuals in the world.
If you know all of this and are yet wondering about why we are making such a fuss about this, let us also share that India happens to be a rich country with lots of poor people with no access to basic health, sanitation and primary education.
If you believe that these are the low hanging fruits in our country, ask yourself why people keep buying gold?
The answer is simple – a complete lack of prioritization!
……. and that is exactly why everybody needs Financial Planning, so that you can prioritize your expenses based on your goals and aspirations.
At AFPPL, we are passionate about providing Financial Planning guidance to our clients and believe that a Financial Advisor’s role is more like rendering a long term, sustainable social service first and running a business, next.