Process of Financial Planning
The financial goal of most people is to become wealthy. This is the reason why a lot of people are seen chasing their dreams of higher income. This is because, in their mind, a higher income correlates with being wealthy. A lot of the time, it negatively affects their health and happiness also. The normal assumption is that if a person has a higher income, then they will also have a higher net worth in the future. However, this is not the case.
The stories of many high-income earners going bankrupt later on in life are not uncommon. These stories can be found in the high earning professional class as well as amongst celebrities. The reality is that long term wealth has been associated with a long term tendency to consistently engage in financial planning. People who pay attention to their finances and take regular action on a month on month basis to end up being wealthier as compared to their peers.
In this article, we will have a closer look at the process of financial planning and how it helps maximize wealth over the long run.
What Does Financial Planning Include?
The goal of financial planning is to ensure that the financial resources of a person are channeled in an optimum way. The objective is to ensure that a person has whatever amount of money they need at a certain point in time.
It is important to note that financial planning is related to life goals. It is not related to maximizing the net worth of a person at the end of their lives. Instead, if they want a certain sum of money ten years from now, the goal of the financial plan would be to ensure that they have the money at the required time.
Human beings tend to have different types of financial goals. Hence, it is no surprise that financial planning is itself internally composed of many different disciplines. Some of them have been listed below:
Steps Followed in Financial Planning?
There are certain predefined steps that need to be followed in order for effective financial planning. The steps have to be carried out in the sequence mentioned below:
The bottom line is that financial planning is a complex discipline that includes several other disciplines like retirement planning, tax planning, asset acquisitions, etc.
Authorship/Referencing - About the Author(s)
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