A ‘record-breaking’ winter-storm battered northeast US and Canada, killing at least 10 people, burying some areas in nearly three feet of snow and leaving upto 7 lakh homes without heat and electricity. The storm came a little over three months after Hurricane Sandy devastated swaths of New York and New Jersey, killing 132 people and causing damage worth some USD 71.4 billion.
Imagine if blizzard hit your finances than are you are ready for it? By blizzard I mean any unexpected event of life. Lack of financial planning can act like a ‘Blizzard’ to your life savings. This article will enlighten you about the importance of financial planning & how to get ready for real time Blizzard in your life.
What is Financial Planning?
Financial Planning is a solution which converts your goals into action plans and provides the direction and discipline to achieve these goals.
Why is Financial Planning Necessary?
If you have certain life goals, such as you wish to have a worry free retirement, you wish to educate your children at the best schools and colleges, you wish to purchase a house or a car, or any other life goals, then building a Financial Plan can help you to achieve these goals.
Your Financial Plan will work towards achieving goals such as retirement planning, child’s education planning, marriage funding, house purchase, debt management and insurance planning.
Financial planning could help you in:
- Categorizing your risk appetite
- Putting a number to your goals tells you what is achievable and what looks difficult to achieve
- Map your current and future cash flows to your financial goals
While some banks do offer financial planning service – I found their approach to be less thorough. I would advice going to an independent financial planner. You could even Google “financial planning” or “personal finance” and get a list of websites that offer this service.
Financial planning can ensure that you are better equipped to deal with the impact of inflation, especially in phases like retirement when expenses continue but income streams dry up.
The second factor is changing lifestyles. With higher disposable incomes, it is common for individuals to upgrade their standard of living. For example, objects like cars that were considered luxuries not too long ago, have become necessities today. Financial planning has a role to play in helping individuals both upgrade and maintain their lifestyle as well.
Finally, there are contingencies like medical emergencies or unplanned expenditures that an individual might have to cope with. Sound financial planning can enable you to easily mitigate such situations, without straining your finances.