Financial Planning

Every rupee is a seed

Do you believe that being planned is the opposite of being spontaneous? Do you snigger at that colleague who arranges his pens height-wise and ensures that each family vacation is diagrammatically prepared for? Well, when it comes to financial planning, the game is different. A financially planned person can afford to make spontaneous purchases, while the opposite may not be true (unless we introduce the slim possibility of ancestral fortune into the picture). So planning your finances doesnt make you a less spontaneous person. It only equips you to be more! Planning your money is the process of preparing for the thrills and frills of your life. It makes you stable and equipped to handle changing needs and demands. Financial Planning is for the progressive, forward looking, and smart individual. The first step to financial planning is realizing that you need to and want to plan financially. Once youve got that clear, you embark on a journey towards financial stability and mental ease. Financial planning can be done with the help of a financial advisor, or you can decide to do this on your own. There are simple steps to follow to plan your finances.

Assessing the current financial position

Financial goal setting

Asset allocation

Making the investmet plan

Implementing monitoring and reviewing the investment plan

1. Assess your current financial position- Take stock of your finances; understand your expenditure and income schedules and where you stand today. Do you spend more than you earn or do you spend less? By how much do you go over budget or under budget? Understanding your present puts you in a better position to plan forward. 2. After step one, you are in a better position to set your goals. These have to be relevant, realistic and measurable aims that you set for yourself. Goals depend on various thingsyour age, lifestyle, needs, dreams, personal goals etc. Once you know your goals, you know which way to direct your plan.

3. After setting your goals, you need to understand your risk profile. All investments have a certain risk associated with it. How much of that risk can you afford to take? Understanding how risk-taking you are involves assessing personality traits, and knowing how you deal with the possibility of a loss, towards potential returns. 4. Risk profiling is an important activity as it helps in deciding which assets to invest in. Asset allocation is the next step as you need to decide where to put your money. You have various asset classes to choose from like equity, debt, infrastructure etc, through mutual funds or otherwise. 5. Everything done so far has led to the making of the investment plan. The investment plan is the measurable, visible fruit of your labour. With the help of your financial planner, you need to make your money work for you. 6. Once the plan is in action, you must monitor its implementation and review progress periodically. You need to regularly review your plan and revisit your goals, as goals evolve with your life situation. If you treat a rupee as a rupee, then it will be just thatsubject to the torrents of inflation, appreciation and depreciation. Alternatively, you could treat each rupee you earn, like a seedwith the possibilities to reap many more seeds. Each rupee has the potential to unearth opportunities for more. All it needs is a change in approach to your financial life.

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