What is Financial planning?
Financial planning is the procedure of developing a personal roadmap for the financial well being of the investor. Below are the inputs of the process of financial planning:
- The finances of the investor, i.e. the income of the investor, liabilities, and his/her assets
- The risk appetite of the investor
- The goals of the investor, i.e. his/her future and current financial requirements
The output of this process is investor’s plan of personal finance that tells him/her how to use his/her money to achieve his/her goals, real returns, keeping inflation in mind, and taxes.
Resultantly, financial planning is the procedure of the systematic planning of the finances towards attaining his/her life goals whether it is short-term or long-term.
Importance of Financial Planning
Financial planning is something that defines the targets of a company, its techniques, policies, budget plans, and projects in respect of the financial activities that last for the long term. In this way, with financial planning, the company guarantees satisfactory and viable policies for financial investment. The importance of financial planning is as follows:
- It guarantees adequate funds.
- Guarantees fund’s providers to effortlessly put the resources into the company that provokes financial planning.
- The financial planning helps to ensure harmony between the incoming and outgoing of assets with the goal with which the stability is kept up.
- This planning also supports the expansion and development programmers that support the long-run organization’s substances.
- The financial planning also helps to diminish the vulnerabilities that can work as a support in the development of the company. This aids to provide a guarantee of benefits and security of the company.
- The planning also decreases the chances of vulnerabilities if an organization wants to change the pattern of its business sector. Moreover, the organization will be in better condition to confront this situation effortlessly with the help of enough funds.