Often enough, we have seen people solely chasing returns and preferring those investments that give them higher returns irrespective of the risk undertaken to generate such returns. This clearly shows that such investors are more inclined towards wealth creation. They firmly believe that if they are following the right investment strategy for wealth creation, it will help them in achieving their financial goals as well. However, this is a big myth. This article will help you understand why it is necessary for investments to be backed by financial goals.
“All you need is a plan, the roadmap and the courage to press on to your destination” – so said American radio speaker and author Earl Nightingale. And it applies well to the investment scenario. We all are uncertain about what the future holds, but a well-planned roadmap could get you much nearer to what you would have thought or dreamed about. Planning is very necessary for all aspects of life. Likewise, for financial decisions, ‘financial planning’ is very crucial. Financial planning is nothing but a well-articulated composition of all your financial goals and strategies to achieve them.
Not just that, but it also includes risk management through taking appropriate insurance cover and also includes estate or succession planning. It even helps you keep a good check on your income and expenses. Quite often, financial planning is misunderstood as a way of getting ‘rich’. However, this is a myth. In fact, financial planning is a way that would help you achieve your financial goals in life. It comprises identifying short-term, medium-term, and long-term financial goals, devising an investment strategy to achieve them, managing cash flows, mitigating risks with insurance, planning for retirement, and much more. A well-articulated financial plan helps you know where your money should go, rather than wondering where it actually went.
Importance of Financial Planning
Here are some of the factors that would be worth keeping in mind:
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September 28, 2020