Money's planning made on the basis of the different variable economic determinant is termed as Financial planning. It is an fluctuating evolution of an individual current and future financial state. Some of the affective factors are cash flows,inflation rate and other plans made by government.it is also called Investment plan.
Activities included in the financial plan are as follows:
A . Analyze the economic situation of the market.
B. Fixation of objectives and identifies the resources available.
C. Calculate the amount of resources
D. Costing of budget
E. Identify the risks and any issues with budget.
For this purpose, a financial planner is hired who professionally prepares plan for people. These financial plan generally covers cash flow management, retirement planning, investment planning, risk management, insurance planning, tax planning and business planning.
A standard financial plan should cover all areas of the individual’s needs and should result in the achievement of proposed goals.The scope of planning usually includes the following:
- Investment Issues: Planning, creating and managing the capital accumulation to generate future capital and cash flows for reinvestment and spending, including managing for risk adjusted returns and also deals with inflation.
- Tax planning: Planning for reduction tax liabilities and freeing up for other purposes.
- Retirement planning: It is the plan to ensure financial independence at the retirement. It has three steps:
In accumulation, you invest in different investment products based on your risk, whereas preservation and distribution stages go parallel. These stages come after getting retired.
Retirement planning may be done in two ways:
a. Pension plan
b. Mutual fund
Generally, financial planner support mutual fund in retirement planning because of the following reasons:
- Mutual funds are more flexible investment products.
- Mutual funds are the tax efficient instrument.
- Mutual funds are more transparent and investor friendly.
For a better idea of these issues we can take suggestions from a financial planner. Financial planners advise clients on how best to save,invest and grow their money. They can help in tackling a specific financial goal. But planners are not the stockbrokers. Different financial advisor has different specialization .Some specialize in retirement or estate while some others consult on a range of financial matters.
They are also helpful in remaining disciplined about financial strategies. Mastering personal finance requires many hours of research and learning.So, financial planners save time also. So it is considered as better to hire a financial advisor for financial planning.