You should know the Basics of Financial Planning which forms the solid base for your financial pyramid. They may look trivial yet it plays a crucial role in the success of your financial plan and ensure financial prosperity.
A for Action
‘Knowing in not enough, we must apply. Willing is not enough, we must do.’ These words of Goethe explain the importance of Action in life. We find a lot of clients/prospects with an inclination to initiate financial planning or investing or buying adequate insurance at some point of time in future.
They are aware about the importance of these financial matters, they are willing to act on them, but they are not acting on them. What they lack is action and that’s where most people fail.
You discuss financial matters with your friends, relatives and even experts (and take second, even third opinion) but you never put your thoughts into action. Financial success is all about taking action. To accomplish desired financial results, you must couple your knowledge with necessary action.
Greater action applied to your knowledge will bring faster results and have greater positive impact on your financial life.
Sooner you start, better it will be as you will get the benefit of the compounding (the eighth wonder of the world) on your investments and lower premiums on your insurance policies. So, start taking action now.
B for Budget
A Budget or a Spending Plan is necessary for Successful Financial Planning. Common financial problems like over usage of credit, failing to save and invest regularly etc. can be minimised through budgeting.
Budgeting is not meant to control you and it shouldn’t prevent you from enjoying life. In fact, if practiced correctly, budgeting does not make you spend less on things you want, it helps you spend more on things that matters.
If you spend everything you earn, you will never be wealthy. Spending less than you earn is the only way to achieve long-term financial security and Budgeting helps you in doing so. It is easier to spend less than earn more. So prepare a budget and strictly adhere to it.
C for Clarity
Clarity is the ability to think clearly without any ambiguity or doubts. Financial Clarity plays an important role in financial success because it helps you make the right decisions and take the right actions. With clarity you will have inspiration and will be able to focus on the things that are essential for your financial goals.
It’s not easy to have clarity about your financial goals, the figures related to those goals and strategies to achieve those goals. You can have clarity about your life financial goals by introspection and meditation.
The goal figures can be achieved and strategies can be formulated with the help of information available freely on web, financial newspapers, magazines and periodicals.
If you find it time-consuming or complex, better take advice from a Certified Financial Planner (CFP). He will not only assist you in financial goals discovery, goal amount computation and financial strategies formulation and execution (if required), but will also educate and hand-hold you continuously for good financial habits and financial discipline. So have financial clarity a.sa.p..
D for Discipline
Discipline is vital to a successful life, be it personal, professional or financial. Your Financial Success and probability to achieve your financial goals is directly related to your Financial Discipline, i.e. your ability to save today for a goal that will be realized in future.
It is rightly said that it’s the rhythm (i.e. discipline) that gets you desired investment corpus rather than the rate of return. You should be consistent with investing even with smaller amounts, and as your income increases you should increase your investments.
The problem is that Financial Discipline sounds easy but is difficult to practice (just like getting up early, dieting or working out). However Financial Planners realize that Financial Discipline forms the core of Financial Planning Process and hence guide and motivate you to establish and maintain discipline in money matters.
The building blocks A, B, C & D of Financial Planning may sound and appear difficult to you initially. But believe us, once you start practicing them, you will start loving them when you get to see the benefits they bring to your Financial Life.
Hope you will always remember the ABCD of Financial Planning and act accordingly in financial matters.