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What is Financial Planning

Financial planning is a process through which an individual can chart a roadmap to meet expected and unexpected needs in life. The intention is to take necessary steps to ensure that the individual is equipped to accomplish financially what he has set out to achieve and is prepared to deal with contingencies as well. Two factors are responsible for the importance of financial planning – inflation and changing lifestyles. Financial planning can ensure that one is equipped to deal with the impact of inflation, especially in phases like retirement when expenses continue but income streams dry up. The second factor is changing lifestyles. Financial planning has a role to play in helping individuals both upgrade and maintain their lifestyle. Finally, sound financial planning can enable the investor to easily mitigate contingencies, without straining his finances. At its core, financial planning is not a very difficult task. All it takes is discipline and religious adherence to the principles of financial planning. Discipline has a part to play at every stage, from setting objectives to actually executing the plans that are meant to achieve those objectives Setting objectives, investing in line with one’s risk appetite, and asset allocation are some of the fundamental principles of financial planning One more important aspect not to be ignored is considering tax and inflation rates into all your investment decisions so as to compute the actual return that you get – this can be significantly different from the stated rate. The simple formula for calculating the Real Rate of Return (RRR) more precisely is:

What this means is that you won’t be right to go merely by the coupon rate on your investment. Look instead at the real rate of return.

How to Get There?

Having discussed how to set objectives, let’s now take a look at how you should go about achieving an objective of becoming a crorepati in next 30 years. We shall assume three scenarios, wherein investments made to achieve the stated objective (becoming a crorepati), yield returns of 12% pa, 15% pa and 17% pa.

Clearly, becoming a crorepati isn’t as difficult as it is made out to be!! In conclusion, getting your objectives right and having the necessary investment plans in place will ensure that you are on a sound footing to achieve your goals – and that’s a fact, not just a cliché. To cater for the investment styles of different persons (since we all are so different from each other), a suggested custom plan for allocation amongst various investment avenues are as given in a parallel link (Broad Custom Plans as per Life stage). Another link, Investing and Giving, gives out the plus and minus points of each investment avenue, as also the noble cause of Charity, which is actually an investment in your country’s future.

Our Process

Our approach to financial planning is simple and straightforward. However, it is also important that you fully understand our consultative process and our step-by-step approach.

Here's Our Six-Step Process

1. Evaluate Current Position: This is the first stage of our interaction. It involves evaluating your current situation which includes cash flow analysis, calculating your net worth, reviewing your insurance coverage for life, disability, home, auto, health, etc.


2. Identify Goals: We then go about clearly establishing the objectives of the financial plan so that, several goals can be balanced. The goals could be short, medium, or long-term and could include a child’s education, marriage, retirement, etc. We identify the Goals as Short, Medium & Long Term Goals. After identifying, we prioritize the Goals & work towards achieving them.


3. Work Out the Plan: We then work out a clear strategy in line with your objectives and risk tolerance. Drawing up a winning asset allocation so that your financial goals are met is fundamental toa successful plan.


4. Implement the Plan: We will assist you in the process of implementing the plan by suggesting the optimal mix of products and services that are essential for the success of the plan which will fit your requirements.


5. Periodic Monitoring: Once the plan is implemented, we will monitor the progress on an ongoing basis. We will periodically report the progress and measure the results achieved vis-à-vis the plan.


6. Review &Rebalance: Financial planning is a dynamic process. We will annually review the plan and progress made, to see if any modifications are required due to changes like inheritance, change in job status, birth or death in the family, etc. We will review the Investments periodically & make alterations in the Portfolio depending upon the Performance