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The term “Financial Planning” is uncommon for most of the individuals. There is not much awareness among the average individuals in India. When we talk about financial planning, the first contra question I hear is what it is? In some cases it is Why do I need? From very few, When to get? Or where/from whom to get? This article intends to answer these 4 W`s of Financial Planning.
What Is Financial Planning ?
Financial Planning is a scientific and systematic way of approaching our future desired goals. In simple terms its is a process of allocating out cash outflows for savings considering the cash inflows, to reach our future needs.
As the wordings goes “Don’t put all the eggs in one basket”, Financial planning process helps you to realize how is your current financial status and suggests you on appropriate diversification according to your needs. There are many financial products available in the market, but how to identify which one is suitable for me is the crucial task. Financial Planning also throws light on the right asset allocation.
Why do I Need ?
Yes there is a need of financial planning with every individuals, it may be from small salary drawer to a big businessman every one need it. There is a myth that financial planning is only for those who has money or wealth. Remember FP is a process which helps in creation of wealth, where as wealth management is one of its part.
Presently in India around 88% of the workforce are in unorganized sector, where they don’t have any pension or any retirement benefits. Financial planning helps in addressing these issues via retirement planning solutions to those who are in these sectors. For those who are in organized sectors, financial planning helps in identifying their needs and allocating to that on timely manner. It also serves as a back up to their retirement phase.
While taking to some businessman, I noticed that they have feeling why do I need financial planning / investment planning when my business is giving me more returns than any investment. But every business has its own cycle, there are many phases in business. When business is in down phase or in struggling phase financial planning/investment planning acts as a back up to him to lead his life with no change in their standard.
Comprehensive financial planning takes care of your complete personal finance. It consists of Investment Planning, Tax planning, Risk management, Retirement planning, contingency planning ,goal based planning like children education planning, vacation planning , house purchase and so on.
When to Get ?
People think that financial planning is to be taken when they have a big chunk of cash in hand or generally at the time of retirement or after retirement, which is a wrong approach. In some of the cases people start thinking about their retirement planning when they are at 40 +, but by that time they might have lost valuable 10+ years of wealth creation and in fact these 10 odd years plays major role in their retirement corpus. Not only for retirement , for each of your goals early planning benefits by huge difference.
Below Example Explains You In Numbers:
Mr. Ram and Sham are aged 30, both plans to take retirement planning solutions from a Certified Financial Planner. After the details analyses of their economic status Mr. CFP suggests them to Invest in a scheme on monthly basis for Rs 5000 /- from today for next 30 years (till their retirement age 60) assuming the scheme gives 12 % p.a.
Mr. Ram starts Today, so his corpus retirement will be 1.76 crore (For an Investment of Rs 18 lakh)
But Mr. Sham starts after 10 years (his age 40), he gets 49.95 lacs. (for Investment of Rs 12 lac)
That shows for the 10 years of early starting Mr. Ram gets 1.26 crore more.
The above example clearly differentiate the benefits of early planning. Mr Ram gets 1.26 crore more for just Rs 6 lakh extra and early payment. This is what we call it as “power of compounding”, which was called as the eight wonder of the word my renowned scientist Mr. Albert Einstein
Where can I Get It Done ?
Last but not the least, this is the area where people are to be very careful. In this huge market identifying the genuine product is more complicated. Financial planning in not apart from this. There are many certification which uses jargons like Financial Analyst, Financial Planner, Financial advisor etc.
But in India CFP (CERTIFIED FINANCIAL PLANNER) is the highest standard for Financial Planning services. CERTIFIED FINANCIAL PLANNERCM Certification is a mark of excellence in financial planning field. It is awarded to Individual by FPSB (Financial Planning Standard Board India) who meets the stringent standards of education, examination, experience & ethics.
The CFPCM marks are designed to readily identify CFPCM professional to the public and to clearly distinguish between CFPCM professional and other Financial Planners. They are international marks owned outside the U.S. by Financial Planning Standards Board Ltd. (FPSB Ltd.). Financial Planning Standards Board India is the marks licensing authority for the CFPCM marks in India, through agreement with FPSB Ltd. Its advised to consult CERTIFIED FINANCIAL PLANNER for your financial planning needs.
And the day came when the risk to remain tight in a bud was more painful than the risk it took to blossom. TOMAS REUSS
