Any act requires a proper plan for the outcome to be the best and finance is no exception to this. One needs proper financial planning to be stress free and lead a healthy financial life.
So what is financial planning? It is the process of clearly analyzing one’s finances and drawing an understanding towards the deeds to be done for current and future well being.
Broadly a financial plan consists of sub components like tax planning, risk planning, goal planning, investment planning and estate planning. Each of these aspects have to be broken down, draw up an analysis and implement.
The right way to plan your finances is…
Before thinking about the future, you need to look at the present. So the first and foremost step is to analyse your current finances and work towards stopping money leaking aspects, if any. For instance, it could be a non productive insurance policy that you hold. Doing so may increase your surplus for investments towards your future financial goals.
As humans we all face two risks that stop us from continuing our regular tasks. One being life risk and the other being health risk. You have to properly cover your self from such risks using respective insurance as this help you indemnify your finances for your dependents in case of any eventuality. Apart from the above you may also face situations where your regular income stops or expenses rise, such events also affect your on-goings and so you should consider building emergency fund which forms part of risk planning.