2 How to increase your wealth without an actual increase in earnings?

There is a famous saying: Money Saved is Money Earned, but let us extend it further as Money saved is money earned and money managed is money multiplied.

If you are reading this, then there is a chance that you want to accumulate wealth with the steady income you are already earning. The only way to achieve that is to properly manage your daily finances. For this, it is important to understand the need for Financial Planning. Financial planning refers to the process of creating a financial roadmap for the future. This blog will discuss why it is important to create one and the importance of financial planning in India.

A financial plan is a roadmap to the future. It is an organized, systematic, and well-thought-out plan which helps you to reach your financial goals in life. Every individual has different financial targets in life, so financial planning is personalized for everyone. While some may want to retire early, buy a car, travel the world, etc., others may want to go on a shopping spree. The most important difference between financial planning and investing is that investing is just a part of the overall financial plan. Financial planning is like a family tree that has your present as the starting point. Your financial plan is your way to financial freedom.

Financial planning can be used to look at various financial options, save and invest money to bring in a certain amount of wealth, have an idea of retirement planning, and generally, become aware of the financial options available to them in the current economy. Financial planning is extremely important for young people, who are just beginning their journey, and hence it is always wise to start early. It would not only help you to invest money smartly, but would also enable you to plan your overall financial goals.

Financial planning gives you better control over your income by:

  • Properly defining your financial goals
  • Provide an opportunity to obtain and protect your financial resources
  • Helps to protect your family from financial uncertainties.
  • Managing your expenses & taxes, and
  • Investing efficiently

Why is Financial Planning Important?

Child’s education

Education is becoming increasingly expensive. With prices rising every year, these costs will only go up in the future. You can use a children’s education calculator to understand the number of funds required for your child’s bright career. A good financial plan will help you build up the amount required by the time your child is ready for college.

Post-retirement goals

Everyone wants to be financially independent after retirement. Thus, you must ensure you have enough funds to cover future expenses and fulfill your post-retirement dreams. A retirement plan offering regular income ensures financial security even after your earnings stop.

Money management

Managing your money is essential to achieve important financial milestones. A financial plan helps you prioritize your important life goals and estimate the funds needed to achieve them. It also helps with getting significant returns on your money within the time frame available for fulfilling your goals.

Tax-saving

Taxes form a significant part of your expenses every year. Hence, it is necessary to make the right investments that help with saving taxes5. With financial planning, you can identify such tax-saving investment options that match your savings goals as well.

Emergencies

With careful money management, you can keep aside an emergency fund worth six months’ salary. It can be useful in case of unforeseen expenses. Financial planning keeps you ready for uncertainties so that financial emergencies do not derail your savings or affect your living standards.

Thus, the significance of financial planning is the clarity it gives on managing your money effectively, and improving your financial well-being.

To sum it all up, getting your financial house in order is one of the most important things you can do for yourself and your family. A lot of that has to do with gaining a solid understanding of how you are going to plan for the future and create a comfortable life for yourself today. We hope this blog post has helped you understand the importance of financial planning.

Author Bio

Qualification: CA in Practice
Company: MRIDUL GUPTA & CO.
Location: Delhi, Delhi, India
Member Since: 09 Feb 2019 | Total Posts: 20
Experienced Chartered Accountant with a demonstrated history of working in the financial services industry, skilled in Statutory Audits, Income Tax, GST Compliances, Auditing, Financial Accounting and Financial Reporting. View Full Profile

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