Financial planning: Faster way to reach you goals

Rahul Somani, 33, has been investing whenever he has had surplus money. His modus operandi till recently was something like this: he would consult his friends working in financial institutions, ask them for stock tips or recommendations to invest his surplus cash. Often, he would also subscribe to a new fund offer (NFO) of a mutual fund, sold to him by his mutual fund agent.


This continued for almost five years. Since his expenses were taken care of by his salary, Rahul was not really worried about how his investments were doing.

Last year, he zeroed in on his dream house and sat down to calculate his savings to make an upfront payment for the property. To his shock, he found it difficult to estimate how much he had invested and what was the returns he got. While some of the shares he bought had dipped almost 80% from the levels he had bought at, some mutual funds did not perform as he had anticipated. Rahul then realised his finances were in a mess, and he had no clue where he was heading with his investments. It was then that Rahul realised he didn't have a financial plan to begin with.

The need for a financial plan
Many individuals like Rahul do not have a clear picture about their finances. While we do have some basic goals, like our kids' education, buying a house and retirement, in mind, the point is they are not well documented.

"If things are in the air, you will end up being emotional and try to time the markets," says Sumeet Vaid , founder, Ffreedom Financial Planners . "Once you have a plan for yourself, it works much better as you go by what is written down and well documented."

Simply put, a financial plan is a budget for spending and saving for future income.

Financial experts reckon that every individual should have a financial plan. "In fact, before you start investing even a rupee, you should make a financial plan for yourself," says Vishal Dhawan , founder, Plan Ahead Wealth Advisors.

Financial planning allows you to ensure you will have funds available to meet your present and future needs.

"As we age, expenses tend to increase - from kids who want toys, to teens who want cars and need tuition, to being an adult, buying a home, a car," says K Ramalingam, a Bangalore-based certified financial planner. In addition, we often find unexpected things happening all the time, like a medical emergency. So, being financially ready for such things makes life much easier. Once you have a financial plan, a lot of financial issues smooth out.

People who don't plan often find themselves living from this month's salary to the next month's or struggling to come up with money in case of an unexpected situation