What is the Scope and Importance of Financial Planning in India?

Most Indians realise the necessity of a well-structured financial plan whenever critical situations arise. Not taking the necessary steps in a timely manner makes them overwhelmed when comparing their success with that of their peers. However, this is one of the foremost tendencies that lead to one’s loss of productivity and financial loss. Ultimately it is vital to realise the importance of financial planning and how it varies for different individuals.

What is Financial Planning?

Financial planning is described as the host of activities required to assess the capital needed for sustaining different life goals. Both companies and individuals must achieve proper financial planning by procuring optimal income, spending within budget and making various investments.

What is the Scope of Financial Planning in India?

Financial planning covers multiple aspects of personal money management. Refer to a few of them in the list below:

1. Investment Planning

Investments make up one of the core elements of a financial plan. The financial experts recommend where to invest and what your approach towards the market should be by evaluating your goals and assessing the permissible risk factor.

2. Tax Planning

In India, if you are aware of various tax regulations stated under the Income Tax Act, you can take advantage of tons of tax benefits legally. Therefore many hire a financial planner who looks for opportunities for tax exemptions so that their client needs to pay the minimum possible tax amount.

3. Risk Management

Considering the large volume of uncertain events we may encounter in today’s fast-paced life, insurance policies are the need of the hour in 2024. When choosing the right life insurance or specific assets that require insurance coverage, a financial planner may come to the rescue and make the right decisions on your behalf.

4. Retirement Planning

A stress-free retirement period is all we desire after spending most part of our life working with strict discipline. Many in India fail to fulfil this dream despite several effective investment instruments like APY, NPS, PPF, etc. being available in the market. To ensure you make the most out of these schemes, a well-defined financial plan addressing the post-retirement capital requirement is necessary.

5. Estate Planning

Distributing your estate among the rightful heirs calls for decisive financial planning to avoid family disputes. A responsible financial planner will issue a will on your behalf and frame its terms as stated by you to execute the whole asset handover process smoothly.

What are the Objectives of Financial Planning in India?

• Determine Financial Standpoint: An expert in this field will help you frame a precise idea regarding your present financial status. While defining this, your advisor will consider all your outstanding liabilities besides calculating the income.
• Assess Capital Needs: This step is linked to the first one. As the financial plan summarises the estimated expenses, it becomes easy to note down long-term and short-term capital requirements that would beat inflation.
• Issue Monetary Policies: Here, you decide how to perform credit control, when to shift allocated funds to safer investment instruments, what insurance products to buy, etc.
• Ensure Proper Utilisation of Available Resources: A financial planner strives to look for opportunities to deploy your least utilised resources to generate the best possible ROI.

What is the Importance of Financial Planning in India?

You need to realise the importance of financial planning if you ever thought about making a budget and living life accordingly. Here, we have discussed them in brief to help you make better investment decisions.

• Initiation and periodic revision of financial planning help eliminate uncertainties which would otherwise restrict growth opportunities. Precise long-term vision allows you to make bold moves without worrying about short-term consequences
• A financial plan drawn under expert guidance ensures adequate funds are available to fulfil milestone needs and wants. For instance, when planning to have a kid, you can start saving for their educational expenses and invest likewise to allow the money to grow over time.
• Consistent stability in the standard of living is a major significance of financial planning. By implementing principles of financial planning, you are able to roughly predict cash inflow and outflow, which in turn can help you reduce dependency on various credit facilities.
• Corporate firms must opt for regularised financial planning services as it helps them to assess a perfect time to launch expansion programs.
• Again, financial planning is beneficial for companies as it helps in discovering their relationship status with partners and suppliers. Too high debt ratio or a disrupted cash flow automatically indicates something is wrong in the system, and it needs to change soon to avoid a financial crisis.

What Steps are Covered in the Financial Planning Process?

Any composite financial planning process must cover the following steps to formulate an ideal roadmap ensuring your financial wellness:

Step 1: Judging the present financial condition

Step 2: Finalising the risk endurance limit

Step 3: Setting both short-term and long-term measurable goals

Step 4: Diversifying investments as a part of contingency planning

Step 5: Monitoring the plan and making necessary changes

As we can confirm now, the necessity of financial planning is vast in India, and its emphasis is growing steadily as financial literacy has increased. More people now stress the importance of financial planning and head to financial advisors for customised wealth creation strategies. If you are presently in a dilemma on managing your funds, refer to the tips mentioned above to maximise the chances of attaining all your life goals.