Financial planning can be referred to as a framework for accomplishing your life targets and goals in a planned and systematic way by circumventing surprises and shocks. The planning comes with aims such as regulating capital requirements, formulating financial policies, and ensuring that the meagre financial resources are employed in the best possible way. Therefore, to meet the demands and needs of the modern era, financial management is a crucial aspect of today’s population.

In this article, we will give you an overview of the financial management plan and provide you with the best tip and tricks for successful wealth management and creation.

What is financial planning?

Financial organization or planning a gradual approach to meeting an individual’s life goals. A financial plan is a draft or document containing an individual’s current money status and long-term monetary objectives and strategies to achieve those objectives. It begins with a thorough evaluation of an individual’s present financial status and future expectations, and it may be created with the help of a certified financial planner or can also be created independently.

The first step of creating a financial plan is cutting and pasting numbers from a number of web-based accounts into a spreadsheet or document. You can lucidly complete this process by following the below-mentioned steps:

Calculation of net worth

Assets: Your assets will include your car, home, cash saved in the bank, money invested in a plan, and all the other things of value that you own.
Liabilities: These include your student loan, credit card debt, car loan, outstanding mortgage. Moreover, you can also have access to a moratorium or grace period as well.

For calculating your net worth, you have to simply minus your liabilities from your assets.

Determination of cash flow

Documenting your cash flow is very crucial for determining how much is required for necessities, what amount is left for savings and investing, and how much can you cut back. Moreover, it is pivotal in financial management plan. One way of doing this scanning and going through your bank account and credit card statements. These will provide you with a good history of your spending.

So, if your expenses vary month-wise, then go through the data of all 12 months, count up all the expenditures, and then divide it by 12 to get your spending’s average monthly estimate.

Consider all your expenses. From housing to clothing, transportation to food, medical insurance to non-medical expenses. Document all the costs, and when you will divide that with 12, you will find out your cash flow.

Consider your priorities

A financial plan’s core is the individual’s clear defined goals and targets. These include buying a larger home, college education of his/her children, retirement plan, starting a business, or may be leaving a legacy.

A professional financial planner or enrolling in financial planning courses will help you in creating a financial plan, choosing a detailed and wise savings plan, tick off unnecessary expenses, and making strategic investments.

Importance of financial plan or planning

You have to ensure adequate funds.
A financial plan also helps in reducing uncertainties with respect to rotating market trends that can be easily faced with availability of adequate funds.
A financial plan ensures a healthy and longer retired plan with the accessibility of funds. It is essential to construct a retirement corpus.
It helps you to create a contingency fund.
It also helps you to tackle inflation. Investing in avenues offering higher returns will help you combat inflation.
Lastly, it helps you in planning and managing money in the best possible manner.

5 Golden Rules for Effective Wealth Creation

Personal Investment Portfolio

Creating your investment portfolio is an achievement. It is the first and foremost step to a successful wealth accumulation. Constructing a portfolio involves allocating your investment amongst assets like equity, cash, and debt. This is known as asset allocation.

Even though equity is the most fruitful inflation countering and tax-efficient vehicle, putting all your money in equity is not a judicious step. Your investment goals should dictate how much money should be allocated to each asset class. Investing for the long term is always a wise move in order to obtain a larger corpus.

Your ideal investment horizon should be 10-15 years. After constructing a portfolio, it is important to review it periodically for keeping the portfolio’s risk within anticipated limits due to market fluctuations.

Manage your debt prudently

Lack of debt management mostly leads to poor wealth management and accumulation. You may trap yourself into a vicious debt cycle if you keep on borrowing new loans for paying off older debts. So, your critical and major life plans will get sidelined due to this factor.

Therefore, it is requisite to strategize debt payment. Chalk out all the debts, and start paying your debts, expensive ones first. Also, make it a necessary point to use credit cards only in emergencies. Credit cards can be alluring and make you fall into serious debts.

Make down payments and look for banks offering lesser rate of interest. If you follow these procedures, you can manage your debt prudently.

Enrol in a financial planning course

If you want to plan your finance strategically and in the finest way, then learning the methodologies and strategies through a financial planning and wealth management course is the best way. The best course for novice as well as experts is “financial planning and wealth management course” by Elearnmarkets. It is the most comprehensive and best course for wealth management. Through this course, you will be able to acquire skills, knowledge, and expertise for managing, protecting, and growing your wealth. Moreover, this course is best-fit not only for individuals who want to manage their personal wealth but also for a professional financial planner who is looking to broaden their horizon and learn the best methods.

Some of the topics that this course are as follows:

Need and importance for financial planning
Systematic Investment Plan (SIP), Systematic Withdrawal Plan (SWP), and Systematic Transfer Plan (STP).
Understanding of fiscal policy, deficits, and monetary policy.
Understanding of passive and active exposures.
Real-estate and goal investing.
Various debt and interest rate instruments.
Concept of fundamental analysis, and many more.

Hence, enrolling in this course will give you a crystal-clear outlook to smart wealth management and allocation of wealth to proper avenues for a secured and risk-free future.

Plan your taxes

It is essential to view your finances from a tax-efficiency perspective. You can freely claim a myriad of tax deductions, exemptions, and benefits at the end of the financial year to reduce tax liability. Moreover, you have to be careful that you do not indulge in tax avoidance or tax evasion. You can learn about tax exemption and deduction processes by enrolling in an online learning course. The Income Tax Act outlines a number of deductions which are stated under Sections 80C to 80U.

Deal with surplus cash discreetly

Managing your surplus cash can be an issue sometimes. If you have surplus cash on hand, then you will tend to spend more, leading to more expenses. So, you can use this surplus cash to make yourself self-sufficient and invest in greater avenues.

With each passing year, things are going to get costlier in the backdrop of inflation. Therefore, to meet your needs, you need to have sufficient savings. It would be best if you learn to channel the surplus cash and counter inflation.

For selecting the appropriate investment haven, you have to first identify your risk appetite and goals. Mutual funds are regarded as the most flexible investment haven. You can start SIP even at a nominal price of Rs. 500.

Bottom Line

Financial Planning is designed to help you achieve long-term financial goals, whether they are to send your children to college, to buy a bigger house, to leave a legacy, or to enjoy a comfortable retirement. You will discover ways to reach your financial goals after you calculate your net worth and spending habits. Therefore, if you are aiming for a secured future, start managing your wealth now.

FINANCIAL PLANNING: TOP 5 GOLDEN RULES TO FOLLOW FOR SUCCESSFUL WEALTH CREATION