Importance of financial planning
The process of identifying capital requirements and framing of financial policies is termed as financial planning. Financial planning is aimed at reducing one’s stress about money and offering a secure and stable financial future. It helps in:
Wise usage of funds: The most powerful benefit of a financial plan is that is helps in effectively utilizing all the funds. One gets a clear idea through preparation and review of financial reports about one’s current financial standing and helps in wise allocation of funds. It also helps one increase one’s savings. Furthermore, It also ensures sufficient funds all through the life.
Long term view: Financial planning offers a long term view of the allocation of funds. Financial reports prepared under financial planning give deep insights into the functioning of your business. This enables solid decision making.
Helps to manage risk: Risks are termed as unforeseen events that can cause financial distress. Untimely death is considered the worst contingency that causes emotional as well as financial stress. Financial planning helps to counter such financial distress.
Asset creation: It gives one great sense of comfort as well as peace of mind to own assets. It is also important to know to the true value of an asset. Financial planning offers insight on asset creation and helps you build those assets that do not become a burden in the future.
Helps deal with inflation: There has been a continuous rise in rate of inflation over the past years and the trend in expected to continue. Inflation destroys the buying power and makes your investments go waste. Financial planning helps in dealing with inflation in a better way.