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Relevance of Personal Financial Planning

In our daily life we focus on arranging our finances for immediate needs like paying school fee, arranging funds for EMI on car or home loan, buying clothing, and the list is endless.

In order to improve the quality of our daily life, we need to take control of our finances. But most people feel hesitant when it comes to investment as they think it’s complicated due to of fear of losing their money.

Common Personal Finance Pitfalls

All of us face several financial issues during our lifetime, which may include the following:

a) Reckless Spending:

Many people live their lives without being able to do effective cash management. Cash management plan should include preparing and following a budget, emergency fund planning, using credit card wisely and keeping the income tax burden to the lowest level possible.

b) No Risk Coverage:

We all face the risk of losing both life and property. Life insurance can be used to protect the family against the risk of premature death. Property and casualty insurance can protect our worldly goods against accident such as fire, flood, earthquake and theft.

c) All Plans and no Action:

We all need to save money for some reason or the other. Saving for education and marriage expenses for our children is the one of the primary goals. Buying a home and building an investment portfolio are two other typical accumulation goals. The wish list is endless but we do not know where to start.

d) No Long Term Goals:

Planning for retirement is important for all of us. However we keep neglecting it and deferring it for various reasons.

e) Hesitation to take Advise:

Getting your finances planned by an expert is one way of ensuring a proper investment for the future, but people abstain from this due to lack of trust on others or their unwillingness to spend.

Tips for an effective Personal Financial Plan

Financial Planning is not a one-time process. One should always continue the cycle of Planning and follow-up as a routine. Following are a few tips for personal finance planning:

a) Track your spendings by keeping a record on pen and paper. Now you have mobile applications that can help you with this.

b) Avoid spending on things you don’t require or you will have less to spend on what you require.

c) Never invest in a depreciating asset.

d) Don’t let your money stay idle.

e) Insure yourself and your dependents.

f)  Spend on learning new things.

g) Plan your taxes.