Financial planning is a generic term that encompasses a long-term process of evaluating one’s sources of income, factoring in recurring expenses and payment of liabilities and thereby arriving at a sustainable financial strategy that not only offers a sound return on investments but also protects you against any potential risks.
Financial planning is vital in ensuring one a secure life even when one is not able to earn from a full-time job due to old age.
Here is a quick look at the components involved in financial planning:
When we speak of financial planning, what is commonly assumed involves investments to increase one’s savings. While this is no doubt an important aspect of financial planning, there are others that gain priority too.
- Determine how much you wish to invest taking into account your earning potential over the years, inflation rates, timeline across which you wish to invest and what level of risk is acceptable.
- Wealth management also involves protecting your assets by means of taking out insurance coverage. Wealth protection plans ensure that your assets are well protected even if for some reason your earnings should drop.
- A good financial planning strategy must also provide for retirement. Steady savings even in small amounts over your earning years in addition to any gratuity you receive at superannuation should set you up well for a secure old age. Senior life insurance and burial insurance that covers the cost of after death expenses must also be covered.
- Lastly, while you may leave behind a will that determines how your assets will be distributed and to whom, it is important that you take the necessary steps to protect your property and other assets from going to the wrong people. A solicitor or your financial consultant will guide you on how to prevent your hard-earned assets from becoming tax liabilities to the beneficiaries under your will.
Sound financial plans that consider all the above factors will go a long way towards giving you a peaceful and enjoyable retirement that isn’t thrown into chaos due to any personal upheavals or market shifts.