Building Blocks Of Financial Planning
Financial Planning is a comprehensive statement or a map which not only list all the objective and goals of an individual but also charts a path as to how to achieve these goals. But it is not just all about investment. We at Dhan Planners adopt a HOLISTIC approach to Financial Planning.
A complete analysis of your finances with the help of Cash Flow Statement, Statement of Net Worth and Ratios, moving to building a strong financial structure based on your goals and finances.
Similar to any strong concrete structure where the base is very strong similarly the base of your financial structure needs to be strong. As seen in the picture the base consists of :
Contingency planning – that is planning for your emergency funds. In case of any untoward events one should have at least three months of mandatory expenses in the form of emergency or contingency funds. Once this is in place we move to next level.
Insurance Planning – second block – have all your insurances in place. All means – Medical, Life, Home and Car.
The above two are the Founding stone to a very strong and healthy Financial Plan. The next level is investment planning.
Investment planning – yes it’s the third block in financial planning and not the whole financial planning. Everyone thinks Financial Planning starts and ends with Investment Planning. SO NOT TRUE!!
Retirement Planning – with life span as well as expenses increasing it is best to start preparing for Retirement from very beginning.
Estate Planning – or Will Planning. Still uncommon in India unfortunately. Despite increasing awareness Indian Parents do not give Will Planning even 2 minutes of their time. It is unfortunate but true. Although the tip of ice berg but again a very important part of the whole pyramid.