What are the Advantages and Disadvantages of Financial Planning? (2024)

Are you thinking about making aretirement plan? Wondering how to invest in a financial program that helps you sail through retirement?

Pay cautious attention to the advantages and disadvantages of a financial plan. A suitable financial strategy and planning well for your future finances is essential. It ensures that you do not fall short of a stable source of income post retirement For this, you need first understand what financial planning is.

A clear understanding of the advantages and disadvantages of financial planning is essential.

What is Financial Planning?

To begin with, you must understand what financial planning is. Financial planning refers to planning your expenses, saving, and investing in the right places for a secure future. It would help if you considered your income, analysed your expenditure, and saved for the future.

All this is done by keeping in mind your future requirements and preparing for any unforeseen circ*mstances. A good retirement plan will stop you from fulfilling your needs and wants in the present. It will allow you to meet your expenses at present, as well as prepare for future payments post-retirement.

Advantages of Financial Planning

Here are the advantages of financial planning:

• Have significant financial controlFinancial planning will help an individual have control over their expenses. If you have a goal set, your purpose behind saving will be clear. If there is a purpose, it will become easier for you to focus on it and move ahead towards achieving it.

• Be prepared for unforeseen circ*mstancesNobody is sure when there can be an emergency. Especially in your old age, you would not want to take other loans. Financial planning will keep you prepared for any unforeseen circ*mstances. Be it health requirements or any other unavoidable expenses, you should be ready. The future is unpredictable, but you can at least be prepared for anything that might come your way.

• Define a purposeIf you have a purpose in life, the path towards reaching that goal becomes easy. Having a proper financial plan can help you stay focused and be ambitious in your career. This is a very prominent advantage of financial planning. If you are sure about your financial goals, it will show you the path towards a secure future.

• Stay away from stress and anxiety about future financesIf you do not have to worry about your finances in the future, you can live a stress-free life now. One of the advantages of financial management is a stress-free present and a secure future. You can be at peace if you have your financial goals set. You do not need to worry about any uncertainties that may arise in the future.

• Reap the benefits of your hard work in your old ageBest retirement planning will ensure you live a peaceful life post-retirement. If you plan well in advance, you can have your retirement sorted. The advantage of financial planning is that you secure your present and future. It is also a good habit to save. You will not have to take any loans to meet your expenses when you retire.

• Get tax* benefitsYou can get tax* benefits if you plan your future finances. Buying a life insurance plan is one of the top ways to save taxes u/s 80C of the Indian Income Tax* Act. 1961. Also, you can opt for a retirement plan such as NPS to save on taxes*.

Disadvantages of Financial Planning

Here are the disadvantages of financial planning:

• Time-consuming processThe limitation of financial planning is that it needs your time. You will not be able to see immediate results. The process of understanding your income, expenses, and savings is crucial. Be aware of your finances and future aspirations to set realistic financial goals. The whole process of developing a retirement plan is time-consuming. Predictions and actuality might not be in line
  
  You will determine your financial goal based on some predictions and forecasts now. These forecasts and predictions might not hold in the future. They are subject to various conditions you might or might not consider. Thus, your financial plan might go for a toss if the predictions do not align with reality. To be cautious, you might have enough room for alterations in your financial plan. Have an open mind.

• You must keep track of it constantlyIt is not enough to make a financial plan. You must keep track of the conditions around you and alter your plans if needed. Having a rigid financial plan might not be the idea. Market conditions need to be considered for your retirement plan to work out. Even when the conditions are favourable, track your progress. See how close you are to your financial goals. Plan your moves to achieve the goals in time and optimise your efforts.

Conclusion

As the prices of commodities are skyrocketing, you need to plan your expenses to stay afloat. Also, checking your income and expenditures is essential to stay ahead of the tide.

L&C/Advt/2022/Jul/1687