"Understanding the Importance of Financial Planning: When to Start and Key Benefits"

Financial Planning needs to start as soon as a person has an income or assets. Either an individual needs to plan on their own or take professional help in doing so. However; most individuals just do not take financial planning seriously or have never given it any thought. In fact, more people would have an astrological report on their career and wealth rather than actually have a plan to build wealth.

Individuals are consumed by their need to grow their salary or business income with limited consideration being given to how much more money can be made through investments. I know individuals even in their 40’s who have never thought about financial planning and needless to say they are only reliant on their salaried income.

Unless you have a very high income and low expenses or are lucky enough to have a large inheritance in sight, lack of financial planning is going to cause a paucity of funds and constant stress and anxiety related to your budgets. Engaging in financial planning can provide the following benefits to an individual:

1)    Plan for emergencies

2)    Reduce financial downside in case of tragic events (accidents, medical expenses)

3)    Secure financial future of dependents

4)    Meet short term and long-term goals such as vacations, children’ education

5)    Avoid debt

6)    Have enough funds after retirement or retire early

7)    Build Wealth

These are just the tangible benefits of having a financial plan in place. There are several intangible benefits as well such as:

1) Peace of mind: Knowing your financial future is secured even if there are a few setbacks is very calming. This is very relevant for people who are in industries with higher job insecurity or people with uneven cash flows during the year, eg. businessmen, freelancer or people in jobs having a high proportion of income in incentives or bonus

2) Better decision making: People who have planned their finances usually end up making better investment choices. People who have not given much thought to financial planning are prone to taking high risks in lieu of higher returns during setbacks

3) Second income source: It is a very commonly heard dialogue for most people “If my salary was XX rupees more, my life would be very comfortable.” Financial planning and investment in the right areas can assist in bridging this gap

4) Career choices: Imagine waking up one day and realizing that even if you quit your job today, you could still make as much money as you are making from your job. When this happens, you would start thinking differently about the path you want to take ahead. Your career need not be just to earn money in order to meet your expenses. This in our mind should be the ultimate goal of financial planning – to generate income from your assets which can replace your current income or can meet your annual expenses.

The more you delay financial planning, the more it costs you and reduces the power of compounding. So please kind in mind all the benefits of financial planning discussed here and start planning for a comfortable and secured future.