How a Financial Planner Can Help You Accomplish Financial Goals?

May 18, 2024 / Reading Time: Approx. 10 mins

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 How a Financial Planner Can Help You Accomplish Financial Goals?

Last weekend, I bumped into my old friend Gauri at a local cafe. Over a cup of coffee, we started reminiscing about old times and soon our conversation turned to more serious topics, like, and soon, our conversation turned to more serious topics, such as increasing expenses, inflation, future aspirations, and financial planning. Gauri, now in her early 30s, shared her aspirations of owning a second apartment, providing quality education to her son, and enjoying a peaceful retirement. Despite her best efforts, she found it challenging to manage her finances effectively and feared her dreams might remain out of reach.

"Gauri," I said, "it's great that you have these dreams, but have you thought about how to turn them into reality with a solid financial plan?"

She looked thoughtful and replied, "I try to save and invest, but it feels overwhelming. I'm not sure if I'm doing it right."

I nodded. "That's completely understandable. Financial planning can be complex, and it's not something everyone is naturally good at. But that's why there are financial planners. They can help you create a robust plan tailored to your goals."

Gauri seemed intrigued. "So, you think a financial planner could really make a difference for me?"

"Absolutely," I said. "A financial planner can guide you, provide the expertise you need, and keep you motivated. They help you align your financial decisions with your long-term goals, making sureensuring your dreams are not just aspirations but attainable realities."

Our conversation made it clear that many of us share these concerns. Turning dreams into reality requires more than just determination; it demands expert guidance and a well-thought-out strategy. This article elucidates how a financial planner can help you accomplish your financial goals.

How Does Financial Planning Work for an Individual?

Planning your finances can feel intimidating. You might not be sure where you want to end up or what specific financial goals you want to accomplish. However, financial planning is crucial as it helps you define your goals and guides you towards achieving them. In simple terms, financial planning is a blueprint of your desired goals.

A financial plan provides a comprehensive picture of your current financial situation, outlines your financial objectives, and suggests steps to reach both your short-term and long-term goals. Good financial planning should include all aspects of your financial life, including your cash flow, savings, debt, investments, insurance, and other elements.

Understanding your financial needs is the first step in creating a financial plan that meets them. This process can significantly reduce the stress of managing money, support your current financial requirements, and help you build a nest egg for long-term goals like retirement. A well-crafted financial plan allows you to make the most of your assets and gives you the confidence to weather any financial bumps along the way.

What Are the Benefits of Financial Planning?

Financial planning offers numerous benefits, helping you identify and prioritise your financial goals. Here are several key benefits that come from creating a financial plan:

1. Boost Your Savings:

When you create a financial plan, you gain valuable insights into your cash flow-your income and expenses. By managing your money more consciously, you can automatically increase your savings over time. A financial plan helps you identify unnecessary expenditures and reallocate funds to areas that contribute to your financial goals.

2. Prepare for Unexpected Events:

Financial planning helps you identify potential risks and emergencies and proposes solutions, such as creating an emergency fund. This fund is a critical component of financial planning, ensuring that you have resources available in case of unexpected events. This can alleviate the stress of procuring funds during emergencies.

3. Achieve Peace of Mind:

A financial plan provides a guide for informed decision-making, helping you manage your money efficiently. Knowing that you have a solid plan in place for your finances brings peace of mind. As you follow your financial plan, the journey to financial peace becomesFollowing your financial plan makes the journey to financial peace clearer and more attainable.

Now that we understand the significance of financial planning in achieving life goals and building long-term wealth, the question arises: how does one embark on the journey of financial planning? While our previous articles have covered various aspects of initiating financial planning independently, many investors either lack the requisite knowledge for such pivotal financial decisions or find themselves short of time to conduct the necessary extensive research.

At PersonalFN, we believe that financial planning, when grounded in fundamental principles, is not as daunting as it may seem is not as daunting as it may seem when grounded in fundamental principles. While this may suggest that hiring a financial planner is unnecessary and that managing financial matters independently is feasible, this assumption is not entirely accurate.

A competent and ethical financial planner can significantly expedite the achievement of your financial objectives. Their guidance can streamline the financial planning process, making it more approachable and manageable.

However, it is crucial to hire a reliable financial planner who adheres to high fiduciary standards. They should handle your finances with the same level of care and responsibility as they would their own. Their recommendations must be research-based, and their approach, and their approach must be unbiased. Nonetheless, availing of such services incurs a fee that you would need to account for.

How a Financial Planner Can Help You Accomplish Financial Goals?

1. Setting Financial Goals:

One of the biggest benefits of working with a financial advisor is the opportunity to set clear and achievable financial goals tailored to your unique situation. Defining your financial goals is the most important step toward accomplishing them. Without a well-defined plan, achieving your goals within your desired timeframe is likely impossible.

A financial planner can help you use the S.M.A.R.T. frameworks, which is an effective method for setting and achieving personal financial goals. This framework ensures that your goals are Specific, Measurable, Achievable, Realistic, and Time-bound-crucial elements for turning your financial aspirations into reality.

Specific: Your financial goals should be specific, with a clear outcome that you aim to achieve. Examples include saving a certain amount for retirement, buying a house or a car, or investing for in your children's higher education.

Measurable: Goals should be measurable, allowing you to monitor your progress and determine when you have accomplished them. This might involve tracking a specific amount or a percentage of your income.

Achievable: Financial goals should be attainable based on your current financial situation and available resources. It is essential to set realistic goals, avoiding overly ambitious or unrealistic expectations.

Realistic: Goals should consider your current and future financial situation and your capacity to save and invest. They need to be grounded in reality to be effective.

Time-bound: Your financial goals should have a deadline for completion. This timeframe helps you stay accountable and provides a sense of urgency to achieve your goals.

By following these principles, a financial planner can help you craft a clear, actionable plan that aligns with your aspirations, paving the way for financial success.

2. Understanding Your Financial Situation:

When you assess your finances and set S.M.A.R.T. financial goals, you gain a clearer picture of your current financial standing and future financial aspirations. To make progress towards achieving your financial goals, it is essential to evaluate your current income and expected future income alongside the amounts required to fulfil various objectives. This comprehensive assessment helps you understand where you stand financially and what steps you need to take to reach your goals.

First, a financial planner helps you determine your current and projected income. This includes all sources of income, such as your salary, bonuses, investments, and any other potential revenue streams. Next, you need to calculate the amount required to achieve your financial goals, whether it is saving for retirement, buying a home, funding your children's education, or any other financial aspiration.

Once you have these figures, a financial planner assists in identifying the shortfall-the gap between your present financial situation and your desired financial position. Understanding this shortfall is crucial, as it informs the strategies and actions needed to bridge the gap. This might involve adjusting your spending habits, increasing your savings rate, or exploring additional income opportunities.

A financial planner provides the expertise and guidance necessary to conduct this assessment accurately, ensuring that you have a solid foundation for your financial planning journey.

3. Budgeting:

Budgeting is a fundamental step in managing your income and expenses effectively. It involves creating a detailed plan of your expected income and expenses for a certain period, typically a month. There are many free budgeting toolsMany free budgeting tools are available online, including a basic MS Excel sheet that can give a clear view of your financial flow.

A financial planner can guide you in setting up a budget on a yearly, monthly, and weekly basisyearly, monthly, and weekly budget. This comprehensive approach helps you make informed short-term and long-term financial decisions. By breaking down your income and expenses, you can identify areas where you might be overspending and find opportunities to save more. This process also prepares you for unexpected expenses, ensuring that you have a buffer in placeyou have a buffer for emergencies.

A well-prepared budget is not just about tracking your spending; it is a proactive tool that aligns your financial behaviour with your goals. It helps you prioritise your expenditures, avoid unnecessary debt, and allocate funds toward your financial objectives. With the guidance of a financial planner, you can create a budget that is realistic, flexible, and tailored to your unique financial situation. This ensures that you are consistently working towards achieving your financial goals, even as your circumstances change.

4. Adjusting Your Financial Plan for Inflation:

Inflation is a critical factor that can impact your financial goals over time. As the cost of living increases, the value of your money decreases, which can affect your savings, investments, and overall financial strategy. A financial planner can help you adjust your financial plan to account for inflation, ensuring that your goals remain achievable despite rising prices.

Firstly, it is important to regularly review and update your financial plan to reflect current inflation rates. This involves reassessing your expenses and income projections to ensure they align with the changing economic environment. For example, if inflation rates are higher than expected, your budget for everyday expenses such as groceries, utilities, and transportation may need to be increased.

A financial planner can also help you choose investment options that historically outpace inflation, such as stocks and equity-oriented mutual funds. These investments can help preserve and grow the purchasing power of your money over time. Additionally, they can recommend strategies to increase your savings rate to counteract the eroding effects of inflation on your long-term financial goals, like retirement savings or education funds for your children.

By factoring in inflation, you can maintain the real actual value of your financial goals and ensure that your money retains its purchasing power. This proactive approach allows you to stay on track with your financial aspirations, regardless of economic fluctuations. A financial planner provides the expertise needed to make these adjustments, helping you understand the complexities of inflation and keep your financial plan robust and effective.

5. Implementing Your Financial Plan Through Strategic Investments:

Once your financial plan is in place, it is crucial to take action and begin investing according to your risk tolerance, investment objectives, and time horizon. Delaying investment can potentially hinder your ability to achieve your financial goals, as time in the market is a critical factor in wealth accumulation.

Investing in mutual funds through a Systematic Investment Plan (SIP) is a prudent option for both novice as well as experienced investors. SIPs offer a disciplined approach to investing, allowing you to regularly contribute a fixed amount towards your investment portfoliocontribute a fixed amount towards your investment portfolio regularly. This systematic approach helps in mitigatingmitigate the impact of market volatility and takes advantage of the power of compounding.

SIPs also utilise rupee cost averaging, where you purchase more units of a mutual fund when prices are low and fewer units when prices are high. Over time, this strategy can result in a lower average cost per unit and potentially higher returns, enhancing wealth creation in the long term.

By implementing your financial plan through strategic investments such as SIPs, you can align your portfolio with your financial goals and work towards generating returns that outpace inflation. A financial planner can assist you in selecting suitable mutual funds based on your risk profile and investment objectives.

6. Creating a Contingency Fund

Planning for unforeseen events through a contingency fund is as crucial as investing in specific financial goals. This ensures that your financial plan remains intact and prevents the need to liquidate investments during emergencies. A contingency fund should be easily accessible to cover unexpected expenses like medical emergencies or job losses.

Financial experts recommend setting aside at least 6 to 24 months of living expenses in a contingency fund. This buffer provides a safety net, allowing you to navigate through tough times without resorting toough times without borrowing or dipping into your long-term savings.

To create a contingency fund, you can start by regularly contributing a portion of your income to a designated savings account or investment option. This fund should be separate from your regular savings and investments, with easy access when needed.

It is essential to use the contingency fund only for genuine emergencies and not for discretionary purchases. By adhering to this principle, you ensure that the fund remains intact for its intended purpose.

With the guidance of a financial planner, you can establish a contingency fund tailored to your specific needs and risk tolerance. They can recommend suitable savings or investment options that allow for withdrawing funds during emergencies while maximising potential returns.

7. Reviewing Your Financial Plan Periodically:

Regularly reviewing your financial plan is crucial to ensuring that your investments remain aligned with your goals and increasing the likelihood of achieving those goals. This ongoing assessment allows you to adapt your portfolio to any personal or economic changes that may occur in the future.

For instance, a particular equity mutual fund may experience underperformance or undergo changes in its investment objective. By conducting periodic reviews of your financial plan, you can identify and address such issues promptly.

During these reviews, you can assess whether your current investment strategies are still appropriate for your financial objectives and risk tolerance. You can also evaluate whether any adjustments need to be made to your asset allocation or investment selections.

By staying proactive and vigilant, you can eliminate investments that no longer align with your objectives and reallocate resources to more promising opportunities. This ensures that your financial plan remains dynamic and responsive to changes in the market and your personal circumstances.

A financial planner can provide valuable guidance during these reviews, offering insights and recommendations tailored to your specific goals and risk profile. Their expertise can help you navigate complex investment decisions and make informed adjustments to your financial plan as needed.

To conclude:

Finding a capable, seasoned, and reliable financial planner might appear daunting. However, it is not an impossible task. Patience and a willingness to take ownership of the financial planning process are essential. Before hiring a financial planner, seek references and verify their credentials. Pose pertinent inquiries regarding their strategies for achieving your objectives, scrutinise their recommendations, and inquire about alternative plans in case their initial approach falls short of expectations.

Additionally, maintaining active participation in the investment process is imperative. While it is vital to have faith in your financial planner's expertise, it is equally crucial not to unquestioningly rely on themrely on them unquestioningly.

Happy Investing!

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Hiral Bhuta is a Investment Consultant & Principal Officer. She is a seasoned professional in the financial services industry, currently serving as an Investment Advisor and Financial Planner at PersonalFN. With her expertise, she plays a pivotal role as the Principal Officer appointed under SEBI's amended IA Regulation. Hiral holds distinguished certifications such as Certified Financial Planner (CFP) and NISM XA & XB, complemented by a post-graduate degree in commerce (M. Com). Her primary areas of focus encompass financial planning, investment advisory, and wealth management, where she leverages her knowledge and skills to provide tailored solutions to clients. With a cumulative experience spanning five years, Hiral brings a wealth of expertise and insight to her role at PersonalFN, ensuring clients receive expert guidance and support in navigating their financial goals.

Disclaimer: Investment in securities market are subject to market risks, read all the related documents carefully before investing.
This article is for information purposes only and is not meant to influence your investment decisions. It should not be treated as a mutual fund recommendation or advice to make an investment decision in the above-mentioned schemes.

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