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Well-defined Financial Plan is Essential for a Secured Future A financial plan will help you shape your financial future in a way that critical to achieving your goals

By Anil Rego

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It is often said that failure to plan is planning to fail. These words could not have been truer when it comes to saving and investing. Today, income generation is happening but the age-old problem of giving a proper direction through a well-defined financial plan still ails most earners. The 9-to-9 job for six days a week and associated travel does not really leave any time for people to think beyond the mundane. As a result, their financial plan becomes like a prescription after contracting a disease. Actually, it should be a vaccine that is taken much before. A good financial plan is essential for a secured future. Today's generation suffers from a unique problem - longevity risk. Chances are high that all of us will live well past the 70s, but do we have an income today and for tomorrow that will enable us to be financially independent? A financial plan can take care of your today, tomorrow and future. Let us understand how.

1. Reach goals - Financial planning at its core helps you determine your short and long-term financial goals and then creates a balanced path to meet those goals. This cannot be done alone. Just like in the gym, a financial plan is incomplete without an expert financial advisor. Like a gym instructor, a qualified financial advisor will get you where you want to be.

2. Income management - A financial plan is a dynamic system. It allows you to manage your income more effectively through planning. If you manage your income well, it is easy to understand how much money will be required for tax payments, other monthly expenses and for savings.

3. Track cash flow - Many people think they are earning Rs 1 lakh but don't really have a great idea of where the money goes. With a financial plan, you can track your cash flows. This will be done with careful monitoring of your spending patterns and expenditure. All through the year, you will be able to do tax planning, indulge in prudent spending and smart budgeting so that your hard-earned cash is optimally used.

4. Capital calm - An increase in cash flow always leads to an increase in capital. This is a great boost for your investments. With more capital, you look at extra investments to improve your overall financial well-being. A well-defined financial plan will give you options to re-look at capital especially after a surge.

5. Family first - Our financial well-being is incomplete without our family. So, no financial plan is okay without looking after your family for life. Having the proper insurance coverage and policies in place can provide a great peace of mind for you and your loved ones. This allows you to breathe easy and reinforce that your existence or lack of it will not harm your family's financial future.

6. Interesting investments - When done properly, financial planning considers your circumstances, objectives and risk tolerance to build a blueprint for investment. It's like a guide and helps you choose the right types of investments that work for you. Everyone is unique. So, all financial plans need to be unique to complement the needs, personality, and goals.

7. Living standards - There is no financial plan that can make your overnight rich. But, if you are not careful, your standard of living can make your poor from rich within a few years. Large and regular incomes can give you an impression that the good times will roll. But the savings created from good planning can prove beneficial in both good and difficult times. So, a financial plan always helps you stick to your living standards.

8. Financial understanding - What every financial planner and financial plan do is enable a better financial understanding of your past, present, and future. If you are looking ahead, a well-defined financial plan can help achieve measurable financial goals. You can easily understand what the financial plan helped realize and what you would do without a financial plan. This gives a whole new level of understanding into your finances, that leads to budget control and lifestyle management.

9. Ace Assets - A plan is as good as the assets. Financial plans help you build assets. But assets can be liabilities at first. So, a financial plan will help you determine if the asset is really worth all the trouble. This knowledge can help you take a good decision and lays out the future to avoid unnecessary burdens in the future.

10. Savings skill - Saving for a rainy day and for those days when it doesn't rain is important. Drastic financial changes can throw you off the track if you do not have a plan. A financial plan helps distribute your money into high, medium and low liquidity options as per your goals and appetite. This allows you to utilize some in the times of emergency or automatically use them for achieving some goal as per design.

Bottom line - A financial plan will help you shape your financial future in a way that critical to achieving your goals. This should be done in consultation and in association with your financial advisor. Every financial plan has to be customized to your needs and so it is important that an accurate and complete assessment of your current financial circumstances is done. It's like buying a car - you can't change the car after buying it. So, it is important that a well-defined financial plan is developed by knowing what's good and suitable for you.

Anil Rego

CEO and Founder, Right Horizons

Anil Rego is the CEO and founder of Right Horizons, an end-to-end Investment advisory and wealth management firm. An MBA and CFA degree holder, Anil believes in the Contrarian approach of wealth management. His areas of expertise includes Corpus fund management, tax planning and end to end financial planning for both residents and NRI investors .

Anil has worked for Wipro as Business Planning and Merger and Acquisition Manager before starting Right Horizons in October 2003. RightHorizons has branches across Bangalore, Mumbai, Chennai and Hyderabad.

Anil has been a columnist in leading Indian newspapers. He also routinely answers queries in mainline publications and websites. He is also a Guest Lecturer with various business schools like ICFAI, ITM and Union Bank School of management. Anil has also served as member, Board of Governors, at IBSAF.

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