Scope of Financial Planning - What Happens in Financial Planning???

Magic! We’re kidding. Nothing weird-and-life-altering-stars falling-from-the-sky happens when you embark on a Financial Planning journey. It is a simple, sweet and straight-forward process which focuses on 4 key aspects of your Finances. Finances when divided on a basic level consist of 4 key departments. Each department needs to be properly evaluated & problems if any must be corrected. This simple diagram explains the building blocks of Financial Planning.

BLOCK 1: - RETIREMENT PLANNING

The longest of journeys start with a single step. We are not sure who said that, but we think it most aptly describes what retirement planning is all about. Planning for retirement is one long journey but a resolute and systematic step-by-step approach makes it a lot less laborious. This laborious part of life can be made easy by understanding the below retirement pyramid.

BLOCK 2: - INSURANCE PLANNING

Yes we all have numerous Traditional Insurances and Insurances where we pay Rs. 50 – 60 Thousand annually for a cover of Rs. 10 Lakhs. It takes no genius to tell you that this is a bad deal. Insurance is not a kind of Savings option. It is not for your child’s higher education, marriage etc. Insurance is a pure – life-cover! Don’t think you will get 10-12% returns, but understand that you will get the peace of mind that your family’s wellbeing is protected even after you. So, in totality you only need 5 types of cover.

 

This is all the coverage you need, don’t fall a victim of the traditional-policy-returns. The returns are fake. It’s not true. Get a term Insurance for yourself & earning spouse – health insurance for family & parents – Disability & critical illness cover for deadly diseases & Property Insurance for your assets.

       BLOCK 3: - INVESTMENT PLANNING

Why do we invest? Of course to save money and earn returns! But why do you want money? to achieve your goals & your family’s dreams. If asked to elaborate, I am sure you will find it difficult to list down five things for which you are saving money. There is no use of saving 90% of your salary, if you have not aligned these investments with goals. The right type of investment product is very important to help your money grow and in achieving your goals.

So this is where investment planning comes in place. Investments of your hard earned money should always be done considering your goals and the time frame in which you want to achieve your goals. This forms the base of your investments. To make the task simpler, you can break down your goals into three different sections:

    BLOCK 4: - CONTINGENCY PLANNING

Also known as emergency planning. It has been emphasized time and again that a contingency plan or an emergency plan has to be in place before starting to plan for other goals. Why? Emergencies can come anytime or anyplace especially when we least expect it. We cannot predict it or even prevent it but what we can do is buffer ourselves against it so that our life does not go for a toss due to the emergency. It is basically saving for a rainy day. So once that you have planned for any untoward or unpredicted eventualities, you can safely move ahead to the next level of the financial plan. A minimum of 6 months of compulsory home expenses must be kept in the contingency fund.