SUMMARY:
A good financial plan must address all your financial needs in one place. This includes various aspects like keeping track of your income and expenses, planning your investments, asset allocation patterns, insurance needs, retirement needs, planning for an emergency fund, estate planning and tax planning. In addition to this, you must regularly review your plan and maintain discipline in following the requirements of the plan.

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Complete Article:

We all know how important it is to have a financial plan. A financial plan helps you plan your financial goals and make investments which will help you achieve these goals. As resources are limited and needs may far exceed the resources you have, it is imperative that you have a robust financial plan to ensure your financial position is not under stress.

Alright, the importance of a financial plan cannot be over emphasized. But does a financial plan only deal with financial goals and how to achieve them? Definitely not! A good financial plan deals with many more aspects, which should help you prepare for various events of your life. Here are a few essentials in a good financial plan –

Budgeting:

• The first essential is to know what comes in and what goes out. It is very important to start maintaining a budget when you begin to earn, so that you can manage your cash flows and identify any unnecessary expense which you may be incurring. 
• This will also help you identify reasons why your cash flow is crunched in any month and means to rectify this.

Investment Planning and Asset Allocation:

• Draw your goals keeping in mind the timeframe for each goal. This is critical as inflation plays an important part in determining the amount you have to save every month to accumulate the required corpus when the goal is due. 
• When you find out how much you have to save every month, determine the investments based on the duration of the goals. 
• Invest for short term goals using short term debt instruments. Long term goals can be planned for by investing in equity investments. Do not use long term investments to fund short term goals. 
• You must also analyze your asset allocation position. If you find that there is a skew in the asset allocation pattern, you must take steps to rectify this.

Insurance:

• This is a critical aspect of a financial plan, but generally neglected. Estimate the needs of your family in your absence, taking into consideration important goals as well as replacement of income. 
• Check if you have an existing life cover for this amount; if not, enhance the cover. 
• Insurance also includes other forms of risk cover like health insurance, personal accident cover and critical illness insurance.

Retirement Planning:

• Retirement planning should be a part of your goals. Often people forget this and assume the Provident Fund or Pension account will take care of retirement. 
• However, with increasing cost of living and increased life expectancy, it becomes critical to estimate what you need post retirement and compare this with the retirement investments you already have. 
• Any shortfall should be planned by investing in equity investments.

Emergency Fund: 

• This is another neglected aspect of many financial plans. Set aside atleast 6 months of your expenses in an emergency fund which can be easily liquidated to meet contingency expenses.

Estate Planning:

• Your financial planning activity is not only to ensure you lead a stress-free life, but also to meet the needs of your family after your time. 
• Many a time, people forget about what happens after they die. Write a Will to avoid any family disputes over your property and get it registered immediately. 

Tax Planning:

• Tax planning is an integral part of your finances. Make sure you make use of all the provisions under the Income Tax Act to reduce your tax burden. 
• Start tax planning activities from the beginning of the financial year rather than postponing your tax investments to the end of the year, as you may end up making some unwise investments just for the sake of saving tax.

Review your plan regularly:

• Preparing a financial plan and implementing it is just the first step. You must regularly review your financial plan and every aspect of your plan to ensure you are on track. 
• Your financial plan may need to be tweaked to keep up with changes in life, and this is possible only if you review it at regular intervals.

Preparing a financial plan, implementing it initially and reviewing the plan regularly is just half the battle won. More importantly, you must stick to the plan and have the discipline to rigorously follow its requirements to help yourself and your family to lead a financially stress free life.                                                                                                                                                                   #gettingyourich