From Chaos to Clarity: How Financial Planning Can Transform Your Future

There is abundant knowledge available today on Financial Products and Money Management in general. A question always remains, should you plan your finances by seeking professional advice? its a subject like Medicine where there is sufficient knowledge available. However, we still consult a doctor. Same can be true for Financial Planning also. While, most of the working professionals are experts in their own field, they may not necessarily be good Money Managers. The concept of Money Management is not just about earning and spending. It is also about planning your future and using your current cash flow to create cash flow for future. There is no simple solution to it because every person is unique. due to different backgrounds and family structure. A unique problem requires a unique solution. That is where getting Financial Planning done from a professional becomes helpful.

Wealth Creation is always a subject of experience. Same product may give different results to different people. For example, if we say a Mutual Fund has a CAGR of 15% in last 20 years, it doesn't mean every investor made that 15%. Depending on the cycle and the time of entry/exit, every investor will have a different outcome. Hence, it is important to take a holistic look and seek professional guidance wherever you don't have an answer.

While knowledge has become democratized due to internet, this can be a problem many times. Knowing and having the ability to create filtered knowledge is important. If you look up 'You tube' or any social media platform, there are 100s of videos, explaining Mutual funds. But, they cannot help you decide which one to invest in. Whether you should invest all in Mutual Funds or diversify? What is the ideal level of diversification? Should you buy gold or real estate? These questions appear simplistic. However, their solution is going to be complex because every individual will have a unique risk profile and unique goals.

Which category of individuals should reach out for Financial Planning or Advice?

There are different kinds of individuals depending on their income and wealth status and risk management profile. Broadly, they can be put into 3 categories:

1. Ultra Wealthy individuals:

Rich HNIs with sufficient money to take care of their present and also future of few generations. Do they need Financial Planning? Of course not. Their focus would be mainly on Investment Planning and multiplication of wealth is their prime focus.

2. Low-income Group:

There are people with income just enough to meet their expenses or literally in the hand to mouth category. Can Financial Planning help them? Certainly not. They should first focus on their income to meet their present cash flow. Once their present is secured, they can plan for future. These are the people working hard to take care of their physiological needs and lowest on Maslow's hierarchy of Needs. Hence, Financial Planning is not really for them.

3. Mid-income group:

The mid-income category of individuals have surplus cash flow. They desire to utilize their resources effectively to reach a stage when today's surplus can become tomorrow's cash flow. This category of individuals can really benefit from right Financial Planning advise. They are generally resourceful individuals as far as their present cash flow is concerned. They are on the edge. They can either rise to 1st or fall into the 2nd category, depending on how they plan it from here. They are either the salaried middle class or upper middle class. They desire to break the chain and move up the ladder. A little professional help can help them achieve their milestones better and with confidence.

Transform Your Financial Planning With Professional Guidance

Financial Planning has some core steps involved before we can arrive at a concrete plan:

1. Understanding Cash Flow today.
2. Understanding the net worth or balance sheet.
3. Taking near term and emergency funds into account. Just talking about it can bring up lot of discipline with Cash Flow Management.
4. Understanding long term goals
5. Preparing for the days when cash flow is gone, i.e. Retirement.

A discussion on these details can be an eye opener for many. There are minor behavioral flaws due to family or neighborhood induced reasons. This can be corrected when you begin these discussions with an experienced Financial Planner. This discussion cannot be about get rich quickly. It is about making maximum out of the limited resources available. The solution can vary for different individuals and situations. It can involve "finding the right job or income." It may include "cutting down on discretionary expenses." Another potential solution is "finding the best instrument for investment." There can be various other solutions. It all depends on the uniqueness of ones situation. This is not just about dealing with money, but also discussing behavior and psychology.

Conclusion:

Financial Planning is a well known concept in many countries and taken very seriously by individuals. However, in Indian context, it is similar to how we avoid going to a doctor and instead depend on self-medication. We try to solve problems based on advice from people around or source information from social Media. We may end up getting into mediocre or risky products without completely understanding how they are going to help. Hence, it is worth reaching out for professional help. This can help get things in your hand and be better prepared for the uncertain future. Are you prepared to sign up with a Financial Advisor? Feel free to reach out Fleek Finance Team to help us plan your better future.