Financial Planning and its Types
Financial Planning is detailed planning about how you manage your finances to meet specific goals in life. A good financial plan is a saviour in life as it helps you control your expenses and makes you mindful of the money you earn. It looks at your objectives and offers advice on how to prioritise, set aside money, and make investments to help you reach your goals within the allotted time.
The practice of managing your money to attain personal financial fulfilment can also be referred to as financial planning. By using this planning technique, you may keep your financial position under control.
Every family and individual has a personal financial position, financial goals, and activities so every needs and requirements differ. At Invikraft, our financial experts adhere to your goals and make customised financial plans to meet them.
Importance of Financial Planning
Financial Planning gives you direction in life. With this, you can set short-term and long-term goals that help you in taking potential decisions.
Practically, there are three types of financial planning:
Short-term financial Plans
As the name suggests, short-term financial plans outline financial goals and investments that are made for the tenure of a one year period. These plans can be corrected if required and are less uncertain compared to long-term financial plans. You must have at least funded four times your monthly wage for the corpus. Emergency funds are useful for covering unexpected medical expenses and short-term income losses.
Medium-term financial Plans
Medium-term financial plans are strategic plans that typically cover a period of 2 to 5 years, and are developed by businesses or organisations to guide their financial decision-making and ensure financial stability. These plans may include Financial Goals, Revenue Projections, Expense Management, Capital Expenditures, Risk Management, Financial Metrics, etc. Overall, it should be a flexible, forward-looking document that guides financial decision-making and helps ensure financial stability and growth over the medium term.
Long-term financial Plans
Long-term financial plans typically involve setting specific financial goals and developing a strategy to achieve them over a period of several years. This may include creating a budget, setting up an emergency fund, investing for retirement, and paying down debt. It’s important to regularly review and adjust the plan as circumstances change, and to seek professional advice if needed.
Conclusion
Having a financial plan is essential for achieving financial security and stability. A well-designed financial plan can help individuals and businesses meet their financial goals and achieve long-term financial success.
