Financial plan is the route map to reach life’s financial goals. And it is typical exercise in establishing long term financial security.
People have many types of financial priorities in different states of their lives, a balanced financial plan is like a 3 legged stool when if not concerning of current life stage and age. If we remove one of the leg the stool shakes and may crash.
In financial planning the most important aspects can be put in to 3 categories like
(1)Budgeting and saving, (2) Investing, (3) Retirement and estate planning, which are three legs of financial planning.
Budgeting and saving:
Budget is a guideline to help everyone in spending money on the things that may be most important to everyone. And it is needed for proper money management. And It is a tool to increase consciousness regarding spending money. There are some changes in savings but without saving plan there will be no enough money to meet future long term monetary or financial goals.
Sometimes amount of available time decides the type of investment to earn the money. Stocks consider long term investments. And it is the best for five years longer investing in stocks or stock mutual funds. You may decrease your return by drawing in when the stock’s price is down, when if you need money sooner than that.
Retirement and Estate planning:
Retirement means period of life from when you can no longer work. Though people choose to retire later of earlier due to financial of personal reasons, 65 years of age is conserved as standard age of retirement. Any combination of sources like a retirement plan such as 401(k) plan, a pension plan, saving account and social security are financed by individuals as per their needs after retirement.
Estate planning involves how an individual wants his assets allocated after his death. Individuals get the names of people whom they want to give their assets and their aspirations will be legally binding.