Over the past two months I am getting better at extreme frugality practices. I have been saving money to primarily reduce my debt. Sometimes I think if I hadn’t had any debt then I would have saved a lot of money. But yesterday I had a question in my mind, “What I would have done with that money?” The answer to the question was. No idea!” I am clueless as to what to be done with the money that I would save. So I decided to have a financial goal. But again goal setting is not easy when you don’t even know what exactly you want to have from yourself and your life. Planning for future is different from goal setting. A comprehensive financial plan is needed for securing the future and goal setting is only a part of the whole process.
Financial planning can simply be defined as, “A process of managing your finances to meet your goals”.
A quick glance at the definition and you would understand it’s a process and it will inherently bring its advantages over the period of time. The benefits of the financial planning that I can foresee are as follows:
Peace of mind: I am having sleepless nights as I have no clue what to do of my money I am saving (I don’t like money in my savings account) and more importantly I do not know when and where to invest that money. Even though I invest my money and it grows I do not know what purpose it will suffice as I have not defined the use of the amount invested in future.
Directed approach: If I know where I am headed financially, my financial decision making is easier and improved I shall be able to make proper investment decisions and shall be able to track my investment performance.
Insurance: I and my family shall be safe in the event of any unfortunate incident like my death or disability.
Security: My children’s future (as and when they come) in terms of their education and their marriage shall be secured.
Discipline: The plan shall ensure discipline in my financial decision making and a clear vision for my financial future.
My next post shall be covering the process of financial planning.
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