No financial planning means bigger financial risks

By: Aadi Sharma
No financial planning means bigger financial risks

Identifying proper financialgoals and planning to achieve them in a systematic way is the heartof financial planning. Without a proper chalked out financial plan,there are a lot of risks. Often we find people without a properretirement corpus and no money to bank upon because they haven'tplanned for it in advance.

Not understanding the riskprofile is another major drawback that a person faces if he hasn'tdone proper . Imagine a retired person putting allhis savings into a high risk mutual fund in anticipation for a highreturn, and loosing a major chunk of his hard earned money. At a timewhen he required a steady, stable income, he has simply wiped out hissavings. Financial planning reduces the risks of loss by removingimpulsive decisions through a seasoned and planned financialadvice.

Besides planning foremergency, understanding the investment strategies and risk profiles,a helps you prepare for major events of life. Be it amarriage, buying a car, or a dream vacation, or buying a house,planning for kids education, daughter's marriage all can be plannedand executed in a desired manner with a well laid out financialplan.

Life often throws unexpectedsurprises like a divorce (which no one even dreams of when onemarries) or a sudden lay off (which might mean a new job hunting andsupporting the family or self for the entire jobless period).Tackling all these require prudent financial planning.

Another major expenditure,which is often ignored by parents, is the cost of educating theirkids. The cost of education is increasing by each passing year andthe desire to be in the forefront demands a good education. Can youimagine what a good schooling, good college, coupled with a foreigndegree will cost? We are talking in Lakhs of Rupees here. If youdon't start saving for your kid's education at early stages, chancesare good that you'll feel the cash crunch when the time comes.

Lifestyle changes as one growsin his or her life. The two bedroom house that you have now might beinsufficient five years from now when you have two kids. Similarly, along vacation every year might become inevitable. A bigger and moreluxurious car might be required to complement your lifestyle as youshift into a plusher house. All this would require financial inputsat different stages of life, and being prepared beforehand willalways help.

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