Factors That Affects Financial Planning in India
The choice is yours whether you want to run to your tax advisor in the eleventh hour or do you want to be proactive and plan your finances in advance?
Well, relax, it’s not as threatening as it may sound to you, if you have your financial plan right in place and done in advance, you will be astounded as to how much control it gives you over your finances.
Don’t let Negligence affect your financial situation.
It is often said and believed “ignorance is bliss” however, I would suggest it’s not the case with financial planning. It is very important to be well informed and well planned when it comes to financial success or money multiplication. It is very important that you step out of being-ignorant zone especially when it is about setting your financial goals and prioritizing them. It is also very important to understand where your money is going and budgeting your expenses.
While you do your financial planning it is important to have a qualified and experienced financial planner or money multiplier by your side. He will help you to thoughtfully create your financial plan, budget, understand your income and expenditure etc.
If you think, creating a financial plan is simple, let me tell you, it isn’t. You need to plan it thoughtfully and pay attention to minute details. On the surface, your financial plan may seem to be “all good”. But when you dive deeper into the intricacies and dig out the details, you might find loopholes, missing factors, etc.
So, what happens when ignoring these important factors of financial planning?
Simple, it can adversely affect your financial outcomes like:
- The shortfall in achieving your financial goals
- Compromised lifestyle after retirement
- Postponing your financial goals forcefully
- Unable to meet desired financial circumstances
This is why you need a professionally prepared financial plan and where it stands out from an inexpert financial plan.
Factors That Affect Financial Planning Are –
#1 Cost of Use To Lifestyle
Today, the average age of the working population in India is plunging steadily. People in their 20s and early 30s have the more disposable income to invest in long-term investments like mutual funds, equities etc. than the early times. Most of the households have dual-income, with both husband and wife working and funding the cost of their use to lifestyle. On the other hand, with multi-national brands setting up in India, the spending ratio is also increasing exponentially.
Today, the average monthly expenditure of Indians constitutes of fixed components like house EMI, Car EMI, eating out, shopping, healthcare expenditure, education expenses, movies, vacation, etc.
So now the question is,
How to minimize your expenses?
The cost of your lifestyle needs to be changed or reduced over a period of time. With the increase in your responsibilities, you need to plan your finances thoughtfully. While working on the financial plan, it’s important to determine your financial goals, your current cost of living, your responsibilities, risk tolerance, time horizon etc. You need to consider the change in lifestyle, as, if the change in your lifestyle is more than what you had assumed in your financial plan, then it might create a hassle in achieving your financial goals.
Cut down the unwanted expenses and gradually bring the positive change in your lifestyle as well as financial planning. Here, a professional financial planner would be a great help.
Spend Less. Invest More.
You can neither be sure of your earnings down the line five years or 10 years. Nor as an investor can you be sure of your returns. One thing you control or curb is your spending.
I have often seen people spend first and invest from what remains. Most often these people are never good investors. In most of the cases, they are never prepared to fight inflation.
However, to be financially stable and to achieve your financial goals it is very important to first invest and then spend from what remains.
Our spending pattern is an important factor that determines the success or failure of our financial plan. Your ability to control your spending is the secret of success of your financial plan.
An experienced financial planner helps us identify the wrongs in our spending patterns. They help us confront spending extravagantly.
#2 Personal Factors That Affect Our Financial Planning
Personal factors can be distinguished between obvious and not so obvious personal factors, which influences financial plans. Obvious factors include –
- Of Financial Dependants On You
- Your Financial Goals
- Your Age
- Your Financial Potential
- Your Risk Appetite
- Your Personal Traits and Attitude
- Your Past Experience
Apart from these, there are a few not so obvious factors that influence our financial plan. Hence, it is very important to consider them in detail while creating your financial plans.
- Evolving culture and society at large
- Influencing customs
#3 The Uncertain Socio-economic Factors That Affect Your Financial Planning
Socio-economic factors play a very crucial role in determining the success of your financial plan. What are these socio-economic determinants of financial plan success?
Let’s find out –
- Policies And Taxes
- Market Volatility
- Economic Cycles
- Political Stability
- Global Markets
Do you agree with these factors affect your financial planning? Kindly leave a comment in the comments section below.