Personal Financial Management: Financial Planning II

What is Financial Planning? Developing a personal roadmap for your financial wellbeing is financial planning. Cakewalk. Isn’t it?

Key inputs for financial planning are as follows

#1 — Understand your finances

#2 — Understand your Goals

#3 — Understand your Risk Appetite

The output of financial planning is a personal financial plan that tells you where to invest your money to achieve your goals, keeping in mind your risk appetite.

#1 — Identify your finances

Get a clear picture of your finances by analyzing the following

  • Source of Income
  • Debts
  • Assets
  • Liabilities

#2 — Identify your goals

Who doesnt want a bigger house or car, have an exotic vacation, the best education for their child, good retirement life and it goes on. So, list your goals and these goals can be anything. Classify these goals as short term and long term goals.


Short Term goal — Buy a 2 BHK apartment

Long Term goal — Son/Daughter education

So, classify your goals. Each of your goals be it short term or long term needs financing!

#3 — Identify your Risk Appetite

Understand your risk appetite by answering this question — How much are you willing to lose?

The answer will lead you to be classified as one of the below

  • Conservative
  • Moderate
  • Aggressive

Once you do #1,#2, and #3, you can determine the financial gaps based on the goals you have.

Pick the investments that fit you based on your goals and risk appetite and ensure financial well-being.

Do always remember, returns are directly proportional to risk. Higher the risk higher the return.

Gilt instruments (government) /Post office schemes have the lowest risk but will also fetch low returns. On the other hand, equity investment has the highest risk but will also fetch higher returns.

With great financial planning, one can achieve their goals. All it takes is research, time, and dedication.

So act now by understanding your finances, goals, and risk appetite and invest in what’s right for you.

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