Mapping Your Future With A Professional Financial Advisor
Arnav’s parents retired a decade ago, and despite being averagely paid workers their whole life, they have a good amount of savings to keep having a comfortable lifestyle. Arnav, who earns a middle-class salary, is concerned as to how he will manage life once he does not have a job anymore.
He asks his mother and father for advice, and they tell him about the rewards of investing wisely and of getting expert information from a professional financial advisor. After hearing them out, he decides to get help from a professional as well.
What is Financial Planning?
Putting your money in a bank or investing in stock markets, is not enough to ensure a well-formulated financial plan. A good financial plan is one that allows you to reach all your financial goals, while also maintaining a good amount of money in hand in case of emergencies. This means that you will have sufficient cash at all points in your life, from the time you start earning to the time of your death. Good financial awareness can help you have a happy life, while also being able to support your children and their education as well.
Financial planning is a comprehensive practice that allows you to assess your present and emerging economic state, allowing you to attain all of your objectives in a methodical way. Managing your costs, investing in the correct securities, defining smart objectives, choosing the right investment strategy, and building a retirement plan are all examples of the same.
What Does a Financial Planner Do?
A financial planner is a professional who understands finance, and they are someone who can help you formulate your financial plan. They can help you devise a step-by-step strategy that is in alignment with the goals you have for your life.
But before you take advice or hire a planner, make sure that they have the proper credentials, and that they understand what you want from life.
A good advisor will be able to help you with a number of financial decisions. This can include:
- How much money you should be saving
- How you can end up getting more returns on taxes
- Where all you can invest wisely
- Where to put your money and what kind of bank to choose
- How much money you should be kept as a contingency fund
Before you hire a professional to help you in this journey, you must be aware of what you would like to achieve in life. Without proper goals and destinations, your advisor will not be able to create the perfect financial map for your life.
Why do You Need Financial Planning?
After hearing all this, you might believe yourself to have enough knowledge to create a good financial plan for yourself. If you have experience in the finance sector, and you understand how money works in the world, then this is okay. But if you are not 100% confident in your abilities to do so, then you should consider getting advice from a professional.
Even if you earn a decent salary now, you might not be able to work past your 60s. If you want to have children, or already have them, you will need a substantial amount of money to support them. And beyond all this, in case of any emergencies, you might need a large amount of money that can drain your savings. It is in times like this, that a proper financial plan can do wonders. You will be able to figure out the financial difficulties in your life and maintain a good reserve of money for future needs with the help of a well-thought-out financial plan.
Basics Of Financial Planning
- Defining your Life Goals – You nor your advisor will be able to formulate a game plan for your financial journey without understanding what you want out of life. The kind of investments and savings you need in life will also alter drastically according to your goals.
- Budgets and Emergencies – A budget is essentially a list of expected revenue and spending for a specific period of time, such as a year. This can assist you in keeping track of your spending and in staying out of bankruptcy. You also need to keep in mind that medical or other emergencies can happen at any time, so having an emergency fund is also very important.
- Asset Allocation – If you invest in too many assets or equities, there is obviously a chance that some of them might be lost. You need to take into account how many years of life you have roughly left as well, so you know how much time you have before you can recover from a financial fall in the market. At the same time not investing in enough assets can also cause problems. You need to find the right balance of this with the help of a financial planner.
- Update your Financial plan – As we mentioned before, life is unpredictable and the markets and the economy are ever-changing. This is why you need to keep maintaining and updating your financial plan according to the times regularly.
Financial planning is something that almost everyone needs. Although the process might seem difficult this is a very vital part of managing your finances. When it comes to money, having a good financial plan is practically a necessity. We can never predict what will happen in life, and being prepared for all possibilities is the best course of action that we can take.
How to select a financial planner?
You can select the perfect advisor for you by checking out their credentials and fee structure. Do not hire anyone without talking to them and making sure that they are right for you.
Is there a distinction between financial and retirement planning?
All facets of an individual's economic health are covered by financial planning. Savings, investment, pension, and insurance coverage, are all examples of this. On the other hand, only financial investments for retirement are covered under retirement planning.