It's found that whenever we ask any investor about the term financial planning they simply say Yes I have done my financial planning. But when we explore the planning in details it is found that all he or she is having is either lying in a bank account or PPF or to some extent it is in LIC. These people think they are done with their financial planning.
In simple terms, we can define financial planning as keeping money in such a way that we can access it in times of need. Apart from this what is needed is a tax-efficient return and the return after deducting inflation.
Most of us do our investment planning by our Bank Account only. Most of us put our money into a bank account or fixed deposit. Money required after a month remains into a bank account, the money needed after 5 years also remains into the same bank and money required after 15 years remains idle into the same bank account only. We feel good as long we see an interest accrual every year. We feel secure as we see we have some funds for contingency.
What we miss in this planning is the cost of security and the cost of the feel-good factor. Our fixed deposits may give us a feel-good factor but it's not tax-efficient or good to cope up with high inflation. What we feel as security may not be secure in a time of need as we have not ascertained the exact number of their future value.
When we talk about the future value and cost of security here comes the matter of complex financial planning. When we calculate the future value of our financial goals we get an alarming number. That says our financial understanding or planning is not at par with future requirements.
Protection is another aspect of financial planning. Protection of future uncertainty can not be bought through fixed deposits and PPF or NSC. For this, we need to have proper insurance planning for health and life.
Growth is the key factor while doing financial planning. We need to put our long term goal-oriented funds into high risk and high growth avenue, while in case of short term need we should consider the most secure avenue.
We are into the business of financial product distribution for 16 years.