What Is The Purpose of Financial Planning?

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purpose of financial planning


Guest Post by Ankita

Financial planning is the guide book that will help you fulfill your life’s goals. It is basically a list of goals and the steps to achieve that. Of course, it is all about how much you are earning, how much you want to earn, your expenses, and your investments.

Since money is the most important factor when chasing goals, financial planning will help guide you throughout your journey to meet your desires. Also, having money when you need it is also very much essential.

Benefits of financial planning.

Basically, the purpose of financial planning is to unlock certain benefits in life. Now, we shall learn about few such benefits.

1. Increase your savings.

When you have a financial planning set, you will have to track of all your income and expenses. By having track of your expenses, you have access to know all about your unnecessary expenses and hence cut them down to increase your savings.

2. Better standard of living.

You may think that you will have to sacrifice your living standards in order to pay your bills and EMI but that may not be the case if you have planned your finances well. Having a proper financial plan will help you keep track of the bills you have to pay while also saving money to maintain your standard of living.

3. Emergency funds.

An emergency fund is a critical point in your financial planning. With the help of emergency funds, you may not have to worry about job loss or any other medical emergency just in case there is one. It is always better to be prepared for adverse situations. Emergency funds can help you get out of any unplanned situation.

4. Attain peace of mind.

When you have adequate money in your bank, you are in a state of peace. With adequate money, you can plan for your future and cover your expenses with ease. Financial planning helps you manage your funds the right way so that you can attain peace of mind. Reaching such a state can take some time but you will reach there eventually if you are following your financial plans.

Financial planning for life goals.

We know that financial planning helps you save your money but it’s more than just that. It also helps you carry out your goals in life.

1. Wealth creation goals.

You need to earn a specific amount to maintain your standard of living and you will need to earn more in order to raise that standard. All your desires, like buying a car, having your own house requires money and hence creates wealth creation an important aspect. For wealth creation, you need to work harder and invest your money in the right places. Financial planning helps you plan all that in advance so that you know what you have to do to fulfill your goals.

2. Retirement.

A lot of people don’t think about their retirement plans at all and it can lead to conflict in your future life. When you retire, you will not be doing any work and therefore you will need a certain amount of money to lead a sustainable life. Even if you start saving a little money every month for your retirement from now, it will sum up to a huge amount when you actually retire. So start saving for your retirement right now.

3. Child’s education.

Education is getting costlier every day and in the future, it is only going to rise. You need to plan your child’s education accordingly. You must start planning right after the birth of your child as it will give you a general idea about the amount that would be required. Calculate the amount needed and how you will achieve it. If you need help, you can even reach out to a financial advisor.

Why is financial planning crucial?

1. To create emergency funds.

Nobody knows what is going to happen in the future because it is uncertain.
Imagine a father saving money for his child’s education and also for his retirement. But unfortunately, there is a medical emergency in the family. Now the father has to pay from his retirement fund which depletes his savings and now he has a burden after his retirement.

Such cases occur all the time but having emergency funds solves the problem. Not only in medical emergencies but emergency funds also come in handy if there is a job loss. Such situations can significantly shake up a person’s financial stability. It is advised to keep at least 6 months’ worth of salary as emergency funds to facilitate your life in case of any emergency.

2. To manage your funds in the best possible way.

You need to identify and satisfy the needs of your family. You need to manage your funds in the best possible way to satisfy the needs of your family. Saving all your money in the bank for annual yields may be a good idea but there are various other ways too. For example, investing in mutual funds can bring more yields than saving money in banks. So, plan and work according to your needs and then you can expect results.

3. Have money for retirement.

After you retire you will not be working and you will be needing funds to sustain. There will be expenses like food, medicines, and bills and you will need some funds to pay them. Your financial plan includes how you sustain after retirement and from where the money comes from after you retire.

By now, you might have Understood why financial planning is important and what is its purpose. So, if you haven’t already, start planning now to enjoy a better life in the future.

Guest Post Author

Ankita Kaushal is working as a blogger for Veronica Karas. She provides what is the purpose of financial planning and has a team of expert Financial Planners to assist her in every project. Get in touch with her for any assistance regarding Financial planning.

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