7 Important Steps of Financial Planning

Financial Planning

Why financial planning is so much important? 

It is one of the most neglected area not only for the non-finance background people but also for the professionals having financial knowledge. The age group of 30-45 years is a mature phase of your life. The first thing that you have to do at this age is sit down with your partner, your life partner, and do what happened in the last few years.you started your career as a bachelor later on you have got married may be your children are also a part of your family by this time.This review will tell a lot about what all the things that happen in your life, you don't earn a lot of money, you have spent a lot of money, you have wasted a lot of money or you have taken meaningful steps to build financial freedom going forward. This review will tell you what you like what you don't like, what are the things you wanted to do but you could not achieve.This review will take you through the approach that you have in life and if any corrections that are required.Take out a diary make a note of all these things so that you will not forget what you need to do going forward.The review of your past 10 years is a must for you to attend a financial freedom going forward.

The PIE chart

After the review, what is the next thing that you should do? The next thing that you have to do is take stock of your income and expenses. Now saving is not an option for you, it is a must thing. whether you are able to save are not is not the question at all. You must save in this age. You might not be saving for various reasons for example you may be earning low salary or you may be spending a lot of money, you will be wasting a lot of money, you could have taken a lot of credit card or some loan personal loan, car loan etc which might be reason for you not to save in the last 10 years. But now that has to change. The saving has to start in your life,. you take up an extra job or maybe you change the job for higher salary If your wife is not working, think about the possibility whether she can also earn and increase the family income.You need to reduce your expenses.For example, instead of buying a new car you could consider buying a second hand car, if you are staying in a very expensive property, you could consider going into another property which has lesser rent. Think about things that you could do which reduce your expenses and which can increase your income thereby now a sustained effort has to be put in to increase your savings If you are not able to do the saving,any planning you make,will not be able to do anything and everything done can backfire. 

you can surely visit below site to get ideas on money savings which can make you financially free.

top10 money saving tips

Now let's look at one by one what are the things that you should consider and what are the things that you should plan.

Savings 

1. Hire a Financial Planner:- The first thing that you have to do is look out for a professional financial planner who can assist you. If you have a financial planner, the mistakes that might happen in your life, reduces. you can follow your process driven approach towards financial freedom. 

2. Health protection plan or Term Plan:-Next step to do it yourself protect yourself and your family from the financial disaster that might happen due to an untimely death or due to incidence of critical illness for you or for your spouse. Now between the age of 25 to 35 you have taken a couple of insurances. some people would have approached their friends or might be having an agency or insurance company. you have taken some of the insurance. Now the step to do is to review that. Just because you have a policy in doesn't mean that you have adequate insurance. When you sit with your financial planner he/she will be able to assist you to find out how much of a life insurance you need to have and how much of a critical illness cover you should be having. Now once you know how much of a life insurance and critical illness cover that you should have now determined that the existing the whatever the planning that you have done and by the balance amount of cover you need to make sure the policies that you by cover at least until your retirement age if possible and economy for take it up to 75 years of your age.

3. Build an Emergency Fund:- The next thing that you have to attend the financial planning in the orderly manner is to build an emergency Fund. Now in your review of past 10 years of your life you have noticed that you have build something you could put some amount in the fixed deposit some money may be idling in some of your savings bank account, some money maybe there in the mutual fund.If any of these money is available in any of these accounts, compartment it properly. what I mean to say is basically, made these accounts as your emergency fund. You should not be using this money for unwanted things like buying a new site or a new vehicle or doing something else or going on a vacation. Identify this amount and say this is the emergency fund.If the amount in the emergency fund that you have is not sufficient for you to sustain yourself, all that you have to do is using your savings you have to build your emergency fund.

4. Retirement Planning:- Next thing that you should focus on is about your retirement.Thought if you already have started something towards retirement Corpus building in the first ten years of your carrier between 25 to 35, that is excellent and fantastic, now increase the contributions to your retirement fund if you can afford, if not at least continue it. if you have not started a retirement fund in the last 10 years, you should take it up on a war footing. The time is running out. If you have started this in the beginning of your career, you have literally had 30 to 35 years to build a retirement Corpus but now, you hardly have another 20 to 25 years or just 15 years for you to build a retirement Corpus. The amount of money should set aside to build your retirement corpus and the Corpus increases year of year. if you do not start this, it must be there in your top priority in life unless you help yourself and this day your retirement can be pathetic and it can run problem during your retirement years. do not neglected, however small it may be, but make a beginning, you can add on as you go forward, the first thing you should do after doing your insurance and building in important it is to make a beginning toward building a retirement Corpus.

Financial Calculation

5. Child Education:- The next thing that you have to focus on is your children's education. your children need a large amount of money by the time he or she starts quality education. You need a really big amount of money when the child goes to the graduation or post graduation studies. you need to be planning for this right from the beginning of things to keep in mind when you plan for child education is it’s very difficult to plan for children's education as things are unknown in the child education. For example, you do not know which course your child is going to pursue, the days where you wanted your child to be an engineer doctor, weather they are pursued to follow your profession where they find the interest. so what interest your children will take up, which courses they go for, which country they will be studying, nothing is known at this point of time. Therefore, the simple philosophy to follow in case of child education is keep the money you are able to set aside. it is better to try making a honest attempt to put as much as possible for your child's education. But that should not come with a compromise, you should not compromise the three structure already talked to you before - insurance, emergency fund and retirement plan. 

6. Buying a property to stay:- The next thing that you should concentrate your focus is a home for you to live. now many people are attracted to properties in the beginning of career itself and they will go and buy a big property. but if your living in some other part of the world, if you are living in another city in the same country, you cannot go and stay there, then it is not practical to put big amount of money buying a house so early. before you buy a house, make sure that you know exactly where you are going to go and you should know when are you going to go back and start to live in that particular house. let's say that you are going to go back after twenty years and start to live in the house, it doesn't make any sense for you to buy the property today and keep it idle and spend a lot of money paying taxes, maintain in the property and other things and in 20 years from now the fashion today will change, the area will change, you may want to live in a bigger property, you want to live in some other City or state. All possibilities exist, so unless you have a clarity about where you are going to go and live in our when you are going to go in living in the house, do not be in a hurry to buy a house. always protect the things that has been discussed in the beginning. it is ok if you want to buy a house but the simple suggestion for you is that,keep the savings, may be mutual fund, may be a Bank FD or anything, start putting money into the compartment with an intention that when the time is suitable for you, that time use this money and buy the house. that appears to be a more prudent strategy than to go and buy blindly a property.

7. Wealth Building Strategy:- After prioritizing all the above points, if there is a lucky person, who is able to save so much of a money and attended to all the points to discuss people and if you are still left with a lot of savings, this is the time for you to work on wealth building. you could buy that extra mutual fund, you can buy new property or can invest in real estate, you can enter into some private equity or you can invest in a business. a lot of possibilities are there but do not neglect the above 6 points 

Financial planning is all about the decided points and the most important part is the discipline. That is the most important and toughest thing.but without a proper discipline in your financial bucketing, it is not possible to have a good relaxed life.