Question

Brief an overview of financial planning and its types.

Answer 1

Financial planning refers to the objective and resources an Individual has and the time frame with in that he wants to achieve that objective. Financial planning is a systmatic process by which individual develops a systematic process to take into account his income and expenditure and achieve his goals. The plans can be short term (1 years) , medium terms ( 1-5 years)Like marriage, higher education , long terms plans ( greater than 5 years) like buying a house or retirement planning.

There are different types of financial planning:

• Investment planning: Investment planning is basically you want your capital to grow in the long term and accumulate a good corpus of wealth. It becomes extremely important that to achive that goal you invest in diversified instruments. The financial instruments can be debt,equity, futures, bonds e.t.c.
• Cash flow planning: Cash flow planning is basically matching your inflow of cash with you expenditure and prioritizing expenditure to take into account for investments and important expenditures.
• Insurance planning: This types of planning is for unexpected circumstances like health insurance, fire insurance, vehicle insurance. These things seems unimportant in the short term but once those circumstances arises not havinga an insurance can cause a seriou financial damage.
• Tax Planning: Tax planning is basically prioritizing your Income, expenditure and investment in such a way that the tax impact reduces at the year end when filing your income tax.
• Retirement planning: Retirement planning is one of the most important types of planning which most people ignore. Retirement planning is done to ensure that when you retire from your job you are not financially dependent on others for your living expenses. It is very Important to consider retirement planning early in your life.