What are the benefits of financial planning?

There are numerous practical benefits to financial planning. It helps you to:


It may be possible to save money without having a financial plan. But it may not be the most efficient way to go about it. When you create a financial plan, you get a good deal of insight into your income and expenses. You can track and cut down your costs consciously. This automatically increases your savings in the long run.

Better Living

Most people assume that they would have to sacrifice their standard of living if their monthly bills and EMI repayments are to be addressed. On the contrary, with a good financial plan, you would not need to compromise your lifestyle. It is possible to achieve your goals while living in relative comfort.


Creating an emergency fund is a critical aspect of financial planning. Here, you need to ensure that you have a fund that is equal to at least 6 months of your monthly salary. This way, you don’t have to worry about procuring funds in case of a family emergency or a job loss. The emergency fund can help you pay for varied expenses on time.

Peace of mind

With adequate funds at hand, you can cover your monthly expenses, invest for your future goals, and splurge a little for yourself and your family, without worry. Financial planning helps you manage your money efficiently and enjoy peace of mind. Don’t worry if you have not yet reached this stage. If you are on the path of financial planning, the destination of financial peace is not very far away.

Financial planning for life goals

The importance of personal financial planning in India cannot be ignored. It is not just about increasing your savings and reducing your expenses. Financial planning is a lot more than that. This includes achieving your future goals, such as:

Wealth creation

The rise in the price of everyday items means that if you want to maintain or increase your current standard of living in the future, you need to create a sufficient corpus of wealth. You may also want to purchase a better car or a new house in the future. All this requires money, and it merely highlights the importance of wealth creation. It is possible to achieve these goals by carefully investing your money in the right avenues. Equity mutual funds can be a suitable option for long term goals. These funds could help the investor to accumulate wealth in the long run.

Retirement planning

Your retirement maybe 25 or 30 years in the future. But that does not mean you plan for it when you retire. To enjoy a happy and comfortable retired life, you need to start building your safety net right now. Planning at an early stage in life can help secure your future against financial uncertainties. Also, you invest lesser amounts if you start early and gain from the power of compounding which helps to build a large enough corpus over the 25-30 year period.

Child’s education

Education has become very expensive, not only in India but across the world. And in future, this cost is only going to rise. This is why it is necessary to start planning from the moment your child is born. Calculate how much you wish to earn and start investing in long-term investment avenues that can help you achieve this goal. You can approach a financial advisor for advice if you are not sure how to proceed further.

Saving taxes

Every year, you are probably paying a substantial amount as tax. But you can now lower your tax outgo legally. The Indian Income Tax Act provides various provisions for people to reduce their tax outgo. By planning your taxes in advance, you can identify the best avenues to invest your money and reduce your taxable income. Mutual funds provide a tax-efficient avenue for investing in your life goals.

Why personal financial planning is crucial?

To tackle inflation

Remember the time you went to a multiplex with your family. You must have probably heard your grandparents say: ‘Everything was so cheap back then’. It’s true. Twenty years ago, the cost of movie tickets was around Rs. 40, not Rs. 500 as it is today. Similarly, chocolates, coffee, clothes, petrol, and other regular goods were much cheaper ‘back then’. This phenomenon of prices rising over the years is known as inflation. It is the steady increase in the price of goods and services over time. And if you are not careful, it can eat into your savings in no time. Here’s a simple example to illustrate its effect.

Imagine a chocolate bar costs Rs. 10 today and you have Rs. 100. With this amount, you can buy 10 chocolate bars. Over the next year, imagine you keep Rs. 100 in a bank that offers you an annual interest rate of 5%. At the end of the year, you have Rs. 105 with you.

But over one year, let’s assume that the price of the chocolate bar increases to Rs. 11. This means you have to pay Rs. 110 to purchase the same 10 chocolate bars next year. But since you have only Rs. 105, you fall short of Rs. 5. This is how inflation eats into one’s savings. It reduces purchasing power over time, and you have to pay more money to buy the same goods.

You can combat inflation by investing in avenues that offer you better returns over time. But for this, financial planning is critical.

To create a contingency fund

The future is uncertain, and anything can happen at any time. Here’s a scenario that highlights this point.

Imagine a father who has taken an education loan to finance his daughter’s college education. At the same time, he is also saving money to fund his retirement that is a couple of years away. But suddenly, a medical emergency occurs in the family. Unfortunately, the lack of medical insurance coverage means he has to pay for medical expenses out of his savings. This depletes his retirement corpus and increases his financial burden.

Many people face such situations. And while it is good to hope for the best, it is necessary to plan for the worst. A sudden job loss or an unexpected medical emergency can shake up your finances considerably. This is why you need to have an emergency fund to deal with such issues. Financial experts advise investors to keep an amount equal to 6 months’ salary as a contingency fund. This can be invested in a liquid fund so that you can access the money quickly in case of an emergency.

To create a retirement corpus

Newer medicines and more significant advances in the medical field mean that people are now living longer retired lives. This is undoubtedly a good thing. You can enjoy more time with your family, explore your passions and dreams, and travel around the world. But there’s one crucial question you need to consider: how can I fund all these expenses? You need to have an adequate amount of money to ensure you enjoy your retired life to the fullest. This is possible by having a financial plan that provides regular income post-retirement.

To manage your money in the best possible manner

Satisfying the needs of your family members can be tricky. Your teenage son may want to go to a space camp during the summer while your oldest child is ready to go to college. In personal finance, planning is vital. It not only helps you understand the needs of different family members but also how you can achieve them. But for this, you need to manage your money in the best possible manner.

For instance, parking your savings in a bank account is better than spending all of it. However, this is not the best way to deploy your money.  In comparison, avenues like mutual funds could provide better annual yields. So, when you identify your family’s needs and make your money work actively to achieve them, you may expect to see good results.

How do we approach financial planning?

Data collection

In this phase, we collect all the relevant data about the client his financial as well as his current situation, his income, his savings, etc. Here we also try to understand the risk profile of the client.

Developing the relevant goals

Here we develop the relevant goals for the client be it retirement planning, child’s education, etc.

Asset allocation

Here we create allocation to different asset class depending on your risk profile.

Review and monitoring

monitoring of the plan regularly or at any change in risk profile is undertaken.


The fees for creating a comprehensive financial plan starts from Rs 40,000 for the first year. The fees are generally reduced as we move into the second and the third year.