must be dynamic to reflect the ongoing changing market environment and the changing needs of the individuals.
Why is financial planning important?
Financial planning is important for all individuals as it not only helps in meeting the present and future goals but also in dealing with unforeseen emergencies in life; in short, it provides the much needed financial security. Further, in a high inflation economy like India, rising prices erode the value of savings and financial planning can help in growing money at protecting a portfolio from such rampant erosions. Financial planning via diversification also helps to harness the power of compounding and reduce the uncertainties arising from a volatile market scenario.
While financial planning is important, it requires an understanding of various terms and processes - understanding the investment opportunities in the current financial system, creation of an optimum asset allocation / portfolio mix, tracking and reviewing the investments among others. Hence, we will try to simplify the financial planning process through a few steps (Chart 1):