In simple words, Financial planning is the long-term process of wisely managing your finances so you can achieve your goals and dreams, while at the same time negotiating the financial barriers that inevitably arise in every stage of life. Remember, financial planning is a process, not a product.

Our life is full of uncertainty and no one knows what the future holds. Whether it will be healthy or weak? So we need to do financial planning to achieve our financial goals and to have financial security in dire circumstances. One can’t achieve his or her future goals, no matter how healthy he or she is, if he or she will not plan for these goals. So one should plan now to have a stable future ahead. It often requires consideration of self-constraints in postponing some enjoyment today for the sake of the future.

Financial planning should be carefully budgeted. When you do your investment planning, you must budget for both big and small spends. Financial planning needs to account for expenses like rent, utilities, and food per month. Once you’ve taken steps to control your debt and spending and worked out what you’re aiming for, you’re ready to start thinking about a plan to achieve your goals.

Following are the six steps, which are involved, in financial planning

Take control: We all need to plan for the future. So we have to control our finances and plan for our future. But it’s really hard to know just where to start. The key things, which generally affect our finances, are what we earn, what we owe, what we’re spending and how much we’re saving. Moreover, goal setting is an essential part of taking control of our finances. If we set the goals then we have the direction – how else are we going to know what to aim for? Once we start thinking about what we want to achieve, we’re going to find that we have a mixture of short-term and longer-term goals. Long-term goals are hard to get to grips with because they can seem so, well, long term. While Short-term goals are rather easier to visualise – maybe you want to buy a new car, save up for a deposit on a house, build up some savings for a rainy day or pay off a loan.

Know yourself: Well, before launching into any financial decisions, we should know ourselves and should understand how we really feel about risk. Risk is simply the possibility, which something negative will happen and this so called risk plays a big part in our thinking about financial planning. The rule-of-thumb with investing money is the higher the return, the higher the risk.

Save little and often: “Save little and often” is the secret of a successful financial planner. Short-term saving is about funding goals, which we hope to achieve in; it may be in next five years. Different investments suit different people at different stages in their lives. So one should make investment after considering one’s risk appetite and liquidity requirement after prioritizing future goals. Different instruments with different maturity are available in the market where one can invest such as deposit accounts (saving a/c, fixed deposit, recurring deposit), equity, debt, property, commodities etc.

Invest for the future: Investment should be made with long term prospects. Balancing your investments is vitally important. Don’t put all your eggs in one basket – spread savings across pensions, your home and investments such as shares and bonds. Make sure that the investments you make in the portfolio contain products from diversified financial instruments with different liquidity. So one should build diversified portfolio by making investment in different financial instruments with different maturity or liquidity to achieve the goals.

Protect yourself: Don’t get so carried away with sorting out your future that you forget what might be just around the corner. Always shop around for insurance. If you’re a homeowner, you’ll need buildings insurance. If you have a car then you should go for a motor insurance.

Get advice: The sixth and final step brings on the financial advisers and looks at how to make the relationship work for you.

Instruments for Investment

Deposit Accounts: Deposit accounts may not carry any of the risks involved in bonds or shares but these do not mean they are risk-free. Real return – the amount of interest earned above inflation can be a very small margin; even there is always danger that inflation may erode returns and reduce the purchasing power. It offers less growth potential than other investments. These investments are ideal for short-term needs.

Debt Instrument: Debt is a special type of loan and is less risky than shares but not as secure as deposit accounts. Bonds pay regular income in the form of interest that can be reinvested for further growth. Gilt funds are default free funds and these funds stick to high quality-low risk debt, mainly government securities. Gilt funds differ from bond funds because bond funds invest in corporate bonds, government securities and money market instruments.

Shares (Stocks) / Commodities: Shares/ Commodities involve more risk than bonds and deposit accounts. Investors get return from investment in the shares in the form of capital appreciation, if the share price goes up and receives dividend if the company shares it profits with the shareholders. Investment in shares/commodities can give better return than investment in deposit accounts and bonds but there may be setbacks along the way.

Real Estate / Property: A lot of money is tied up in one asset. Mortgage and maintenance costs can be high. This investment can give good returns if the house prices rise significantly.

Conclusion

Making frequent investments into your savings plan is an important part of your overall financial plan. A financial plan is a road map to help you to achieve your life’s financial goals. The reality is that a great salary with income to spare does not guarantee financial success, nor does a modest salary necessarily prevent financial success. Financial planning isn’t something that happens by itself. It requires focus and discipline. Financial planning proves to be highly useful in effective canalization of your money. Proper financial planning provides one with absolute financial freedom.

 1) DetermineYour Objectives -
The first and the most important thing which is to be done is to direct yourself and create a timeline driven comprehensive wish list of all the
possessions. To start with, ask a simple question, “Why DoWant To Invest?” and pen down on a piece of paper the reasons for it. The reasons for two
different females may vary depending on their priorities. For instance:
For married women with kids, the reason for investing could be child’s education or child’s
marriage.
For women whose kids are already married, the desire to invest could stem from a dream
to set up a small boutique.
For women who are yet to be married, it could be for their marriage.
While penning down you realize that you come across variety of objectives and it is to be noticed that the list is longer than you
bargained for.
Whencompiling the list of objectives we come across with some interesting options:
¥ Saving for own marriage 5 years from today.
¥ Saving for child’s education 15 years from today.
¥ Saving for child’s marriage 20 years from today.
¥ Saving for a small business that you want to set up at a later date.
¥ Saving for a gift for your spouse or parents.
¥ Saving for retirement or an overseas trip ormay be a pilgrimage 30 years from today.
Once the objectives are clear in your mind, we move on to the second step of preparing the investment plan through an investment advisor. He will make an investment plan suiting your
investment objective and keeping in mind appetite for equity linked investments, investment time frame, tax-efficient returns and the like.Your role is to give inputs for the plan.

2) Identify The Investment Advisor –
Since the investment advisor will be playing a major role in helping you to achieve your investment objectives, therefore it is important to connect with a right advisor. It sometimes
happens that the advisors in lieu of boosting their commission end up having a ruinous impact on the investment plan. One needs to check the certification of the advisor in order to ensure
whether he is certified or not. The investment advisor should be objective and unbiased in his advice. Being objective means placing the client’s interest over your own. Even after making
investments in either of the avenues, your relationship with Investment advisor continues, in terms of account statement, premium cheques to be submitted to the life insurance company,
follow up on dividends on mutual funds and the like.
After identifying the investment advisor, now an investment plan is prepared.

3) Preparing An Investment Plan -
Now comes the implementation of the investment plan. Some pre requisites for implementation of the plan are the details regarding what you want to achieve, time frame over which you
want to achieve the investment objective, the amount of money you want to invest in equities (this is important because equities can give a push to your savings, but also carry a higher risk).
This may sound tedious to you but is necessary at the same time for the advisor to fulfill your investment objective. It’s just like telling your doctor everything so that he can prescribe the right
medicine.

Some Rules to remember

 v      Spend less than you earn

 v      Pay your self first

 v      Pay-off credit cards before other debts

 v      Always shop off-season

 v      Get pre-approved for a mortgage before you begin house hunting

4) Executing The Investing Plan -
After preparing the investment plan, your investment advisor will help to execute it. This involves, for instance, choosing the investment opportunities. Before choosing the avenues for
investment you should not forget emergencies. These can be temporary loss of job, accident or illness. Or be ready for pleasant surprises like weddings or birthdays. One needs to set aside
money equivalent to about 3-6 months expenses and invest timely. The different avenues are:
¥ Equity
¥ PPF
¥ Real Estate Gold, Bullion, Real Jewellery
¥ Art, Paintings and Antiques Mutual Fund
¥ Unit Linked Insurance Schemes Small Saving Schemes like NSC,KVP, and IPO
Deposits etc.
5) Review The Investment Plan -
Setting an investment plan and executing the same is one task and to ensure you stay the course is the other. This means regular review of the plan is necessary. There could be several
reasons behind reviewing the plan from time to time. One reason can be when stock market change course over a period of time, it disturbs your asset allocation. This may result in
redemption of some of your equity investments or purchase of more of them depending on how much risk you are willing to take. The other instance can be that you approach the milestone
(either your child’s education or marriage) and you need to move out of the equity investments since equities are risky in the shot term. The money should be invested in short-term debt,
which is relatively safe. This may sound complicated to you again but your investment advisor is the one who will keep an eye on such events and will make suitable adjustments to the plan.
On your part it helps to be informed since it’s your money on the line.
Different women have the different financial predicaments in which they are likely to find themselves. As it is known, there are a variety of issues, problems and solutions to consider. Once
these issues are kept in mind, it is easier to sail through. Money today is an important key to happiness hence women should plan their finances and investments well. Women can attain
success with education and planning.Adopting a systematic and individualized approach with the aid of financial planning professionals can help to address and solve these problems while
achieving woman’s investment, retirement and estate planning goals. So ladies, it’s time to wake up and smell the coffee.
“Start Saving in Summer of Your Life to Survive the Winter of Your Livelihood”.
 

INSURANCE PLANNING
Every good financial plan needs to start with a good foundation by protecting the risk. Here risk includes life insurance, health insurance and insurance of valuable assets, liabilities etc. The purpose of life insurance is to lessen the financial impact associated with death/ unexpected loss of assets / unexpected health challenges. Life insurance is to provide financial protection for the one’s dependant family. Without the continued benefit of the income, the dependant family might have to compromise on their ongoing expenses for housing, transportation, food, clothing and other necessities. Insurance can bring peace of mind, knowing that these risks are covered. Life Insurance should be selected to protect the life risk and not for the great returns it offers. We need to balance the cost and the investment component, hence it would be advisable to get a Term Insurance cover and invest in Postal Savings schemes, Mutual Funds, Direct Equity, Real Estate and the opinions are endless.

RETIREMENT PLANNING
AS LIVING TOO SHORT can be planned with Life Insurance Planning, Retirement Planning covers the problem of LIVING TOO LONG and hence is an integral part of a financial plan.
Strategies are designed to suit individual goals and comfort level as well as to take advantage of tax saving opportunities. For any plan to be effective, it is necessary to implement these strategies and to review the goals periodically.
Young person and we are talking about retirement, but most of us today want to retire at the age of 40 or 45. Retirement doesn’t necessarily mean stop working when we can work no more or retire at the age of 58. The modern age retirement means you retire when your investment income surpasses your salary or active income. In other words you can stop working and still maintain the same life style. Inflation and interest are factored to know the exact amount of the retirement fund.

INVESTMENT PLANNING
Living too short or living too long, both are covered, but in case of emergency, proper investment planning plays a vital role. Any good investment plan is one, which is balanced but diversified, absorbs risk and maximizes returns. We can do the following to benefit from investment planning:
Create an Emergency Fund: An emergency fund is usually a separate account that is maintained to meet unexpected and important short-term needs such as car repair or a new appliance or a sudden health crisis. Emergency funds are established to minimize the effect of an unexpected event such as temporary job loss or reduction in income.

Asset Allocation: Asset allocation is the process wherein we can match our risk tolerances and financial objectives to our investment portfolio. Selecting different asset types may reduce the risk of the overall investment portfolio. Most common asset classes are,
·Cash or short term investments (savings accounts, money market funds etc)
·Fixed Income investments (Cash Deposits, bonds etc.)
·Equities (domestic and foreign stock, equity mutual funds etc.
Allocating our investment to various assets classes depends on factors including investment objective, time horizon, attitude towards acceptable risk, desired return and tax bracket.
The rule that is to be followed here is, “PAY URSELF FIRST”.
This rule can be put in use by starting systematic investment plans offered by many mutual funds, wherein a specified amount is invested each month in selected managed diversified funds. Normally we get worried about the returns on the products and wait for the ideal investment opportunities thereby losing a lot of time. However, we need to understand that if we don’t save money regularly then on what amount will we get return?

FOR EXAMPLE:
If A saves Rs.5000 per month for 5 years, then he saved Rs.300000. If he would have spent all that money, then where does the question of return comes from? Here comes the job of a financial planner who plans the cash flow thereby helping to save that little extra money and places them in right investments to give reasonable return.
Now the last aspect that is to be covered and cannot be ignored is Tax and Estate Planning.

TAX & ESTATE PLANNING
Tax planning involves the art of minimising taxes by making investments in tax-favoured instruments and planning well in advance. On the other hand Estate Planning too plays an essential role in financial planning. Some think that estate planning is for the wealthy, a belief that is simply not true. An estate plan allows us to decide how our assets are to be distributed, both during our lifetime and on our death. Preparing an estate plan involves understanding of the legal documents, concepts and strategies, which a solicitor can very well make us aware of.

After explaining Financial Planning as a whole, we need to understand that we being good at our field of work would ensure higher growth, higher salaries and higher income but understanding the aspects of financial planning will ensure us a higher net worth. So it’s important to be aware of these concepts if we want to live a luxurious life throughout without compromising on our desires.