Mention financial planning and the reactions it will generate are likely to be about as diverse as they can be. With magazines, newspapers and television channels spreading the gospel of financial planning, one section of investors is likely to give it a thumbs up. Interestingly, there is another section that continues to be indifferent to financial planning; their rationale being that financial planning isn’t relevant to them. While we will revisit this debate later, first let’s discuss what financial planning is all about.

Coming back to the debate, it’s a rather popular myth that financial planning isn’t meant for individuals across the board. For example, it is widely believed financial planning has no relevance for those who don’t have sufficient finances at their disposal. Then, another school of thought suggests that financial planning holds no utility for those are well-off. Nothing can be farther from the truth. Financial planning is in fact a pervasive activity.

The universality of financial planning
How often have we heard the statement – “I barely manage to make ends meet. Financial planning isn’t my cup of tea”. An individual who makes this statement perhaps needs the most help with his finances. If wealth creation is the solution to his woes, then financial planning is the only way to achieve it. The individual in question must clearly outline what he wishes to achieve (in monetary terms) and then set out to accomplish the same by means of regular investments in line with an investment plan. In other words, financial planning is relevant to him, irrespective of his present state of affairs.

Now, there’s a fair chance that the individual’s savings at present might fall short of the requisite sum to be invested. A typical reaction is likely to be – “let me wait for a while, have sufficient investible surplus and then start investing”. That would be the wrong approach. The key lies in getting started at the earliest with the savings available and then making up for any deficit at a later stage. Saving and investing are habits that tend to grow on us. Hence, the sooner one starts, the better it is.

On the other end of the spectrum are individuals who have access to surplus funds. Often, the example of individuals engaged in business activities is quoted in this context. The popular perception is that a successful entrepreneur with sufficient liquidity doesn’t need financial planning. His business activity is good enough to provide for all his needs. However, this need not always be the case.

Let’s not forget that a businessman’s surplus funds are inextricably linked to his business; the entrepreneur still needs to plan and provide for life stage events like his retirement, among others. This in turn entails conducting a thorough evaluation of his needs after taking into account his post-retirement lifestyle. Also, unlike a salaried individual whose revenue streams are relatively stable, an entrepreneur doesn’t enjoy the comfort of such stability. Hence, saving for a rainy day (read financial planning) is equally pertinent in his case.

The downside of ignoring financial planning
Now, we aren’t trying to paint a doomsday scenario, but it isn’t difficult to guess what will happen should financial planning be ignored. It’s a bit like starting out on a journey without a road map; reaching the destination will largely be a result of how lucky one gets. And if the destination happens to be something like buying a house property, providing for a child’s education or one’s own retirement, missing the mark could prove tragic. Then, there’s the possibility of not being equipped to deal with contingencies, which is also an unenviable proposition.

 In conclusion – financial planning is an activity that is relevant for individuals across the board. The key lies in appreciating its importance and getting started at the earliest.

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