What is Financial Planning?

Nowadays we keep hearing the term "Financial Planning" through different Media. Have you ever wondered what it really was?

Financial Planning is the process of Identifying your Financial Goals and coming up with a plan to either achieve it or even exceed it.

An e.g. of your Financial Goal could be Planning for Retirement or paying for your kids Education.

Now why would be waste our time trying to "plan" for our future when we could just save as much as we can each month and hope that we hit our goals?

Try to imagine how a big builder would build a mall on a big piece of land. How about if he just starts laying the foundation and start building the shops and he hopes he gets everything right?

But we all know thats not the way it works. Before a single brick is laid on the ground , there is an architect who lays out the "Blue Print" for the entire Mall...Where do we fit the J C Penneys and the Food Courts and the Movie Theatres and so on.

Coming back to our example Financial Planning is the "Blue Print" of your Financial Future. Because there are so many products with so many different features and different tax consequences depending on what you are investing for. So after all the goals have been identified , a good Professional would be able to recommend to you a good Portfolio of products which should hopefully increase the chances that you would actually achieve your financial Goals.

Term or Permanent?

Once it has been established that there is a need for Life insurance, most people struggle with 2 questions :-
#1 : What Type ( Term or Permanent ) ?
#2 : How much?

We will attempt to answer #1 in this article .

It would all boil down to 2 factors :-

1> How much you can afford
2> How much of you Life insurance needs are temporary in nature?

Factor #1 can be easily arrived at by analysing your monthly income and expeditures.

Factor #2 can be determined by the following questions :-

Do you have an outstanding mortgage and other loans that are temporary in nature ( Expected to be paid off in a few years?)

Financial Planning...What is it?

We hear the term Financial Planning being mentioned quite often nowadays. Ever wondered what it was?

Imagine there was this big piece of land and the owner of that land wanted to build a mall in that big piece of land. Now how is he going to do it? Is he just going to start laying bricks wherever he can? Or is he better off coming up with a plan as to how many shops he is going to have and lay them out so that he has it totally planned as to how much area each shop is going to occupy? As a matter of fact he would not be able to lay out even a single brick without getting a permit from the city. And we all know the city is not going to give him that permit unless and until he has a blue print!!!

Now Financial Planning is based on the same concept. Its a blueprint of your financial future!!

Every one has financial goals. For eg. Pay for your kids education, have sufficient income during retirement etc. With a good Financial Plan your chances of meeting those goals are substantially increased. There would be other variables like how much you have to invest and how much of a timeframe you have but basically your chances of meeting your Financial Goals are vastly increased with a Financial Plan than without one!!