Friday, 25 January 2013

What is Financial Planning?


Financial Planning is the process of meeting our life goals through the proper management of our finances we have with us, Life goals can be any-thing let us not assume any scenario, but  let us practically compare with our self NEED. Just for sake of consideration we start from the first stage out of six stage of life divided in pre and post 40’s (Check Fig:1.0)

Different Stage Of Life (click on pics to view enlarge size)

Majority of us will be in first three stages where we have various Financial Goals as explained in (Fig :1.0) Financial Goals can be anything which begins  in a today’s youth life right from getting self higher education, getting married, buying a house, starting new or expanding business, saving for your child's higher education, accumulating wealth for Child’s Wedding & planning for retirement . Besides this there are many small and medium requirements such as Planning for family vacation, Purchasing Dream Car or Sports Bike, Diamond Necklace for Wife & not to forget Pilgrimage for Parents. Together with all this there are lots of social responsibility which we perform anyways....

The Financial Planning is process that helps you take a big picture look at where you currently are and when and where will you reach. This is completely based of facts and calculation which forecast whether you are on right path of saving and investment or you need to do some changes towards it.

Now, Let us consider  to plan for Top Responsibility Goal from mentioned above goals, Majority of all will agree and will start with 1st is to give my children best education, 2nd will be getting Daughter Marriage happily and 3rd getting settled, successfully & happily  after retirement. Hence we have taken Child Education for explaining purpose.  



In above Fig 2.0  while planning for Child Education we have considering the Age of the Child to be "0 to 3" Years and assuming after 15 to 18years child would require higher education & Inflation and expected rising cost is taken as 7% although current inflation and recent past rosen education is much much higher, still we have taken this just considering things will improve and over the period of time everything will happen good, but still this much is what will face. Also the same theory of good and better returns are also taken with achievable possibilities on rate of return and not taking too high returns. 
This is however just for illustration purpose,  but if you had some things else than do make best use of online calculator available on our website which will help you to get much better and approx figure with all the different combination you would like to have in planning. (Click Here..)

Now Let us consider 2nd  & 3rd goal, with  just some text for below.

Responsibility 2: Child Marriage (After 21 Years from Now)

Assume your child age is 4 years and inflation rate is 7%.

Q. What is the Average Age when a child gets married?
Ans.       25 years

Q. What are the Average Expenses of Marriage Today?
Ans.       Rs. 8 Lacs

Q. How much would your child’s Marriage cost you at maturity?
Ans.       Rs. 35 Lacs is your requirement from 21 years from now.


Responsibility 3: You’re Retirement which is after 32 years

Current Age: 28 years. Retirement Age - 60 yrs. Life Expectancy - 80 yrs.  Assuming inflation @ 7%. Returns on Retirement Corpus is considered 6% as bank interest are seen diminishing

Q. What is an Average Monthly Expense House Hold Expenses of a Middle Class Family ?
Ans.       Rs. 12,000/- p.m.(Just considering basic expenses for food and other necessities)

Q. How much Retirement Corpus would you need at Retirement?
Ans.       Rs. 60 Lacs corpus in Hand  

( The above 60 Lacs is not assumed figure. It is an minimum estimate figure, you will  be surprised to know that 12,000 will be 1 Lac plus  at starting month when you reach age 60 and will go upto 3 Lacs Plus till your expectancy age. For which you will require 60 Lacs, besides this you will also have need to fulfill your other expenses of health etc. this all are taken in consideration.)

Here, where we have considered just THREE TOP GOALS of our life on an average a young couple have to work towards Total Corpus of  1.5 Corer plus as of today, which is taken minimum besides our living place and other things are considered are present 


Below are the indicative Solution which can help you to achieve your goals..
 

As already stated SOLUTION on investment as shown in fig above is only for illustration purpose , Rather in practically field there are lots of solution which can be provided as per your risk taking and repayment or saving capacity. 

Dear Friends, If we consider all the goals the figures all the GOALS and If your have LOANS and repayment etc... The Amount will go much much high... But all this can be achieved by simple method of Investment and Saving Tax.  and that what is called Financial Planning...
 
Financial Planning is just not to get the derived figure you require but also providing you appropriate Financial Investment & Insurance Option which will help you achieve your Life Goals On Time. Do not hesitate to consult a recognized or Certified Financial Planner and get your basic check up done for sure.



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