Importance of Financial Planning for Individual

After presenting the budget for the country by our finance minister, Have you seriously ever think about to make a budget for yourself? When I asked this question to some of my friend ,I have got many type of reaction for this . For someone it is balance between income and expenses and for the other one it is nothing but a term created by the new breed financial planner.

In fact it is the first step towards drawing up a financial plan for an individual. Most of the time youngster don’t take it seriously when we talk about budget to them. In contrast those who are near their retirement take it very serious.

It is the tool to identify the financial position of the person with the help of details provide by the person about their income, expenses, financial commitment. After income and expenses detail if you have surplus than you can make a financial plan. If there are no surplus you cannot plan for future goal .

The whole idea behind the budget that one should be aware of his/her income and expenditure. it will give you a idea about saving, investment and so on. One should not stop after asses the income and expenses.  The next most important thing to recognize the future goals and make some provisions to achieve those goal at specific time.

When we talk about budget most of person ask the question about certain lifestyle. Is a certain lifestyle the only thing we need to achieve? The answer is each one of us needs to decide one thing : Are we making short term gains for long terms pain!

Need Vs Desire

Before buy a product or service ask yourself the one question : Is this a need or desire? If this is a desire, than ask am I buying it at cost of a need. For example Buying a mobile phone could be a need but buying a expensive handset with so many features which I barely use could be a term as a desire. So every time I pay cash or swipe my card the one question I need to ask myself is : ‘Do I need it?’

Asset Vs liability

This definition needs to be very clear to everyone. An asset is one which generates further income.If I buy a house (for self residence ) but in realty it is not asset. If tomorrow house prices of the property goes up how do I benefit ? I still have to stay in the same place and if I want to sell it and shift,, in most of the case, the other place will be equally expensive or may be more.

At the end one thing is very clear one should always focus about his/her future goal and separate needs from desires for the successful financial planning. To make budget is the first and important step to make financial plan.

Dear readers , give your feedback about above article and feel free to ask any query or question regarding investment and financial planning.