Areas of concern of financial planning that make your financial planning knowledge stronger…
DEVELOP A PLAN
Step by step planning towards achieving financial goals forms the very essence of creating an efficient and effective financial plan Defining a brief outline for a financial plan requires addressing certain concerns like Achieving flexibility, liquidity and tax minimization.
Achieving Flexibility:
Developing or creating a financial plan requires a deep understanding of your personal and financial goals. Financial goals are situation specific and may vary individual to individual. The goals pertaining to an individual may change or vary relative to prevailing situations in your life. For example, events such as births, deaths, illnesses, and marriage can affect your goals profoundly. Other factors like change in employment, inflation, investments and results, and miscellaneous factors will also affect your financial circ*mstances. Therefore creating or making plans which are unresponsive to change should be avoided. Flexibility thus plays an important role towards creating a plan suitable for changes in your life. This can also be considered as customizing a plan for an individual with respect to several variable factors, these factors, in turn, define the development of a financial plan.
Liquidity:
Adequate liquidity is another area of concern which requires being addressed before the process of financial plan development starts. Liquidity is, particularly important for handling situations classified as financial emergencies in particular if we consider the advice of financial advisors who recommend that setting aside funds equivalent for a period of 3 to 6 months of an individual’s expense. Appropriate locations for these funds are savings, and money market accounts or a standby line of credit to accomplish the same level of liquidity.
The important part here is to ensure quick and easy access to money in order to avert or address critical situations.
Liquidity: the characteristic of an asset that can be converted readily to cash without loss of principal.
Tax Minimization:
Finally, it all boils down to addressing an issue of minimizing taxes. Considering that one of the prime objectives of developing a financial plan to save taxes, tax minimization automatically becomes one of the concerns which is to be addressed. However, an effective financial plan will automatically cater your income tax concerns if designed keeping in mind the step by step approach of developing a financial plan.
The first step
There are several ways in which you can proceed.
Financial planning software:
using a financial planning program on your computer is one of the easiest ways to develop a financial plan. A software of this sort can streamline the process in the long run, although it requires an effort initially to enter data. Another way which is by far the simplest and the easiest method to date is using the pen and paper mode of developing a financial plan.
Things to consider
One of the most important things is to determine how to meet your goals. Once you have a direction all you need to do now is to simply follow the route through. You should also create a plan for your intermediate- and long-term goals. Here, again, try to stay flexible. If anything, the need for flexibility increases as your time horizon recedes; you’ll have less control over distant events. Remember, too, that the most carefully constructed plan will be worthless unless you actually go ahead and implement it. Keep a record of each action step, including when and how it was accomplished, these are some of the prime characteristics that may help an individual aspiring to be a successful Financial Planner.
Be patient—implementing your plan can be a time-consuming process. Your personal situation will dictate whether you decide to proceed with or without professional help. Most people will benefit from assistance at some point, at least in implementing their plan.
IMS Proschool2023-12-12T13:02:04+00:0019 January, 2016|CFP|Comments Off on 3 important factors of Financial Planning
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