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    What Is the Importance of Financial Planning?

    Financial planning is an essential part of any individual’s life, and it is crucial to plan for the future and have a goal. People often neglect financial planning, but it can be easier to get to where you want to be with the right financial advisor. Proper financial planning does not only help you make money, but it will also help you manage your money and save for retirement.

    The financial planning process can be an effective system for managing personal finances by balancing income, expenses, and assets to meet one’s goals. It can be a complicated process to understand and execute. So, you need a financial planner who is a professional specializing in this area. They can help you create a financial plan tailored to your needs to meet your financial goals. A financial planner will first assess your current situation and then recommend strategies best suited for you. These strategies could include things like:

    – Building an emergency fund

    – Investing in stocks or bonds

    – Saving for retirement

    Factors affecting financial planning 

    • Spending behaviour

    How much you are spending or which things you decide to spend affects your financial planning the most. First, you need to determine that your critical spending should be essential because overspending has a huge bad impact on the long-term financial planning process

    • Financial potential

    How much is your earning? How fast and far can you go financially dependent based on your savings? All these factors are pretty crucial for your financial planning process. If you are planning to do something or start something which will require fund support that is exceeding your essential financial potential, then it is harmful. 

    • Your age

    At every certain age, you have a different type of spending period. You may prefer to spend more on clothing and accessories in your young adulthood days. On the other hand, you may like to spend more on household necessities in your late adulthood days. 

    • Economy 

    It is one of the most significant factors affecting your financial planning. You may not be able to notice it directly, but it has a huge role to play. For instance, if your country’s economy is not doing well, you will see that automatically your wage is also decreasing.  

    Key steps in financial planning

    • Identify financial situation 

    You need to identify your spending to develop effective financial planning. For instance, household budget, living expenses; tax payments; and savings and investments. 

    • Determine financial objectives 

    You need to be focused on a particular goal if you want to achieve your financial planning. For instance, 

    -Getting married 

    -Purchase a car or property 

    -Provide good education to your children 

    -Saving enough money to enjoy your retirement life 

    -Develop Various Ideas for Investment 

    • Conduct risk evaluation

    Always consider the possible risks associated with your financial planning process. It will help you always to have a backup plan which will be beneficial in an emergency or crisis. Any decision-making process needs frequent analysis to gather current data and information. And updating the plan accordingly is very important. 

    Therefore, it is of utmost importance for you to seriously consider all the above mentioned aspects for great financial planning for your future.

    Also Read: 4 Ways in Which Automation Will Change Financial Services

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    Daniyel Chatterjee
    Daniyel Chatterjee
    Daniyel Chatterjee is a Young Researcher in the field of Data Science & Analytics having research experience of more than 8 years. He has a Masters in Computer Engineering and currently serves as an Editorial Assistant in IGI Global, United States of America. Daniyel also holds honorary positions in the Associate Member of Institute of Research Engineers and Doctors, International Association of Computer Science and Information Technology, International Association of Engineers, Society of Digital Information and Wireless Communications.

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