Five reasons why financial planning is necessary

Planning is part and parcel of every task of the day, be it household or official work. Without planning, there can only be one result and that is chaos, which will lead to failure and frustration. So, the concept of financial planning is very important.

Here we take a look at five reasons why financial planning is necessary:

For a better tomorrow

Millennials now a days are of the opinion to work hard now, to rest better tomorrow. As comforting as this dream may seem, achieving it is equally difficult, if you do not have a financial plan. In a financial plan, identical to the hard shifts you put in your employment or business, your money is also put through its paces by investing it into optimum investment opportunities. With worth of each rupee increasing every year, savings made in your bank account is not going to be worthy option to plan for your retirement.

Mere awareness of destination not enough

Everyone has some or the other objective such as, buying a house, foreign trip, child education, marriage, retirement etc., These are pure destinations, but to reach their, one needs a clear path and set of activities to be followed. Financial planning is that set of tools, which provides each investor with appropriate measure to reach their destination precisely and as planned if not early.

Prevention better than cure

A famous saying states, “don’t dig a well when you’re thirsty”. A financial planning makes you immune to any future contingencies, thereby help you to be future ready. Any financial goal least needs a stable income source, however human life is full of uncertainties, thus any unplanned mishap, such as loss of job, medical ailment or even partial or permanent disability may crush all the dreams. However, with the help of financial planning these uncertainties, could be nothing more than a hiccup in otherwise a successful chase of your objectives.

Introduces discipline in your life

Successful financial planning is all about discipline and consistency. Financial planning is all about ‘save first spend later’ approach, which results into creation of a savings habit. Small savings creates big corpuses, however if there is lack of discipline, there are high chances of missing out on the desired destination. Thus, financial planning does not happen on random savings, it needs savings on a continuous basis and for a longer period.

Manage your income in optimum manner

Any financial planning starts with the income at hand and fixed expenses necessary for daily living. Financial planning helps you to identify the amount of savings required to attain an objective in a specified period. As a result, like fixed expense, a fixed saving liability is created, which indirectly helps in achieving the desired objective at desired time. Thus, if you know how much to save, you indirectly know how much to spend, thereby resulting into optimum allocation of income.

(The author is founder, Money Mantra. Views expressed are personal)