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ViewPoint India

October 2012

Financial planning - Why you must plan your finances You may have often been approached by advisors suggesting that you need to plan your finances, without any delay. Have your investments aligned to goals, and track them continuously with the help of a financial plan. Many of us being experienced in making sound investments would wonder the real need for it? When my money has and continues to make money, why I do need a financial advisor? Especially when that advisor can’t guarantee higher returns than what I have received.

Well, the answer is simple. A financial plan is a map that will aid you to reach your destination. If you don’t have a map, you may or may not reach where you want to, or within the time period you thought you should. It is not a magic carpet that will fly you to your destination instantly rather it will act as a guide that will ensure that you are on the right path. More importantly, it will help you to track where you are headed and if need be alter the path basis the changing circumstances.

All of us have hopes, dreams, and life goals for ourselves and our family. These might include buying a home or staring a business, saving for college education for children, taking a dream vacation and retiring comfortably etc. Some of us may also have unique dreams such as opening that exclusive terrace restaurant or writing a novel instead of continuing in the present job. And, we do believe we will achieve them however most times, we forget to put timelines and cost implications for them.

Many times, we also do not or may not like to do a reality check regarding which dream or goal is our priority over others. Am I equipped to meet all goals, or will I have to sacrifice one for another. Should retirement planning take precedence over child education or can I achieve both? Will I be in a position to meet all my responsibilities if I left my job in next 5 years or I would need to work for the next decade? Therefore, it is imperative that we create a financial plan which lists our goals, prioritizes them, aligns the investments to them by taking into consideration our risk appetite and time duration for each goal.

What is financial planning? As I said, financial planning is a comprehensive, ongoing approach that starts with defining your dreams, developing a plan to help you get there, tracking your progress along the way and recommending changes where desired. In other words, it is the process of wisely managing your finances so that you can achieve your dreams and goals — while at the same time helping you to negotiate the financial barriers that inevitably may arise in every stage of life.

*As per Wikipedia

ViewPoint India

October 2012

Your financial plan will identify strategies and tactics to help you: Examine your present financial situation • To move forward with a solid personal plan, you'll need a clear picture of your current finances. Your plan will help you answer the following questions: • Do you have a clear picture of your goals and dreams? • How do you track your current income and expenses?

Protect what's important It will help you decide. • How will unexpected events may impact your family's goals? • How are you prepared for dealing with financial risks, illness, long-term care or death? Accordingly, it will aid you in taking decisions to protect your family from the financial impact of unexpected events by taking cover for life and/or assets such as home, car etc

Accumulate wealth • What are you saving your money for – retirement, home, your children's education? No matter what are your goals, you'll need to prioritize them. Your financial plan will guide you through the process, so you know: • How will your current investments support your financial goals? • How much do you need, and how soon will you need it? • What has been your approach to market fluctuations – diversification or risk tolerance?

Plan for retirement Whether you've just entered the workforce or you're getting ready to leave, retirement planning should always be on your list of financial priorities. Your financial plan will help you save for retirement so you can answer the following questions more confidently: • What do you dream of doing post retirement? • Do you have a plan that will help you to turn your retirement vision into a reality? • Are you confident that you will be able to replace your paycheck post retirement?

Leave a legacy From supporting your family to funding a charity, it's important to plan and take control of your financial legacy. A financial plan will help you to decide the following: • What purpose do you want your financial legacy to serve? • What will happen to your assets?

How financial planning makes a difference? Financial planning is based on long-term, one-to-one relationship with an advisor and involves a comprehensive, ongoing approach to manage all areas of your financial life. A financial plan can bring tremendous changes in how you feel about your finances by:

• • • • • •

Increasing your confidence about financial matters Various recent researches have shown that people who have written plans feel that they: Are more confident about their retirement. Are more likely to have determined the amount of money required to save for retirement. Have a clear financial direction. Feel prepared, even during changing market conditions.

ViewPoint India

October 2012

Making you feel more prepared for whatever the future holds Your life is not constant, so how can your financial plan be? Working with a knowledgeable financial advisor – someone who takes a genuine interest in your financial success can help you to stay on track, to achieve your objectives. • Review your plan regularly and track your progress made towards your goals. • Apply new solutions, strategies and tactics as your requirements change.

Giving you the ability to prioritize and be practical Financial plan is not an exercise that focuses on getting amazing returns. It is a blueprint created for you to achieve your goals with the available finances, thereby making investments that are best suited to you. The challenge is to find out if multiple goals are possible to achieve or not. In certain cases, due to multiple goals running concurrently, some goals may have to be postponed or else dropped.

Therefore, in today's uncertain and volatile economy, financial planning is extremely important. Moreover, with vast number of options available for saving and investing, managing your finances can be confusing. Creating a financial plan can make the picture clearer for you by identifying the path you need to take to achieve your long and short-term life goals.

Disclaimer:―This document is a copyright of Ameriprise India Pvt. Ltd. While providing the content, the author has made utmost efforts to provide authentic information however, the author and the company expressly disclaim all and any liability to any person who has read this document, or otherwise, in respect of consequences of anything done, or omitted to be done by any such person in reliance upon the contents of this document. The reader should make his/her own independent investigation, seek appropriate professional, legal, tax and financial advice before making an investment decision. All investments in Mutual Funds and Securities are subject to market risks and the returns may fluctuate from time to time please read the offer document carefully before making the investment. Past performance does not guarantee future returns.‖

Financial planning-Why you must plan your finances  

You may have often been approached by advisors suggesting that you need to plan your finances, without any delay. Have your investments alig...