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What is Personal Financial Planning

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ship_sails“I can’t change the direction of the wind,

but I can adjust my sails to always

reach my destination”. This quote by

Jimmy Dean highlights the essence

of Personal Financial Planning

beautifully. Each of us has goals in life,

some for tomorrow, some for a couple

of years later and a few more for the

future. Irrespective of the nature of

these goals, what is common to all is

that they require finances and planning

in that order, to be fulfilled.

While most of us have some sort of planning for the important milestones in our lives – accumulating assets such as a house and a vehicle, providing a good foundation for our children – education and marriage, our own retirement among other things, we often overlook the fact that life can and does throw speed breakers in our path. It could be a financial setback such as loss of pay due to prolonged illness, or the investment made specifically for your son’s education falling short of requirement. This is where Financial Planning comes into being. It helps you fulfill life’s goals, take into account the setbacks and prepare for the future by enabling you to take informed decisions about your money in the present.

Personal Financial Planning is all about preparedness.

It is acknowledging the fact that the only thing certain in life is uncertainty and being as prepared for it as possible. It is knowing that life will throw up some speed breakers as well as shortcuts and being ready to take on both.

As a process, Personal Financial Planning involves identifying, defining and prioritising your financial goals, and charting a detailed plan aimed at achieving these goals.

It’s a three-step process involving:

  • The Now – What do you have?
  • The Future – What do you want?
  • The Bridge – How are you going to get there?

The Now

  • Ascertain your net worth – Enumerate your Assets and subtract all Liabilities from the same
  • Determine your cash flows – Calculate your monthly income and subtract expenses to arrive at savings – also account for expenses that are annual, bi monthly, quarterly or ad-hoc in nature

The Future

Define and prioritise your goals – Quantify them in today’s value

The Bridge

Considering variables such as your age and your attitude to risk, a plan is developed to determine how best to achieve your goals with the resources that you have.


For InvestmentYogi by Lovaii Navlakhi

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