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Before starting "Financial Planning " there are certain things which are essential to be understood deeply . These will help in removing confusions with respect to investing and financial Planning.


Undrestanding Financial planning :-


Financial planning is the process of a personal roadmap of your future financial well being. Through this process,individuals achieve their financial goals and fulfilling their needs in a disciplined and systematic manner by taking a holistic view of their life.


Wealth creation is a time consuming, easy to understand and very difficult to implement process. There are no cut fast rules on how to create wealth.


Many times investing is considered as Financial planning . Investing is only part of overall financial planning. Financial planning provides direction and meaning to your financial decisions. It allows you to understand how each financial decision you make affect other areas of finances.

Financial Planning is not a product or a one-time event, but a process - a life long process .It is an organised ,well-planned system of developing plans for your financial resources which helps you to achieve both short term and long term goals.


Everone has bias towards particular Investment

A person who is good at stocks will say '' stocks are best investement ". A person who who real etate says "Real estate is the best ".

A peeson who likes Gold says " Gold is the best investment".

This personal bias towards invesment is based on personal past experience, current circumstance and short term perfomance of particular investment.

This bianess toward particular investment creates confusion . Then you add procedure bias and you become more confused. Some people say " Diversify" ."Don't put all your eggs in one basket," and still other such us Warren buffet ,greatest investor says,"Don't diversify".Put all your in one basket'.

Basically investing is a plan , not a product or procedure as most of the people underatand.


Mental Attitude

Are you mentally prepared for financial planning ?
Money will be anything you want to be means money comes from our minds, our thoughts. If a person says " money is hard to get ," it will probabably hard to get .if a person says Oh I'll never be rich " or its really hard to get rich it will probably hard to get rich" it will be probably true for that person.


Mental preparation is the first step for starting any " Financial Planning " . It requirs change in "Paradigm Shift" towards thinking process towards Investing and financial Planning.


The Four Dimensions of Investment return -Risk, Reward , Cost and Time

When navigating the the financial markets , the investor must keep in mind the four basic dimentions of long-term-return - Reward,risk,cost and Time- and must apply to every asset class. Never forget thet these four dimensions are remarkably interdependant.


The below figure shows how the four dimensions interact .Never make an investment without having a clear idea of impact each dimension will have , never develop a financial program that doesn't meet the same standard.These four dimensions are interlinked in tantalizing ways-some time obvious
sometimes subtle. The " Intelligent Investor" can not afford to ignore any of them. The chalange is to weigh each of them properly in the light of the Investment goals to be achieved. Doing so with common sense and discipline is the key to the development of sound investment program.


Life Stage Determine

Every individual goes through varios life stages in his or her life span. Each life stage different approaches to the financialPlanning at each of these stages. "There are 3 basic periods in the financial cycle.-"Accumulation, Preservation and Distribution. These translate into four stages of the life cycle.


(ages 18-30)
(ages 30-45)
(ages 45-60)
(ages 60 and over)

Early Adulthood

*Its the beggining of your caree *you start earning your own income *you have many goals and ambition for the future

Family Formation & Career

*You begin to get set in your family life.*Your income increase but so do your expenses * Money management gets more complex

The Primary Years

*You are at the peak of your career & financial demand from your family peak too. *You are approaching retirement & must reconsider your money management startegies


*You have retired from your career or at least going slow with your working life *You have stopped earning so actively & start living off your saving

This is the time to establish sound money management habits which will hold good though life

Focus on long term capital growth

You need a good balance between capital and stability of Capital

You have to ensure that you maintain your standard of living although your income doesn’t come from same source as in past


Investment Vs Saving

"In simple economies, there is little distinction between savings and investments. One saves by reducing present consumption, while he invests " in the hope of increasing future onsumption.Saving and investing are two unique concepts, and it's important to understand the difference between them and the need for each.Saving, by definition, involves the protection and preservation of money from loss.

Investing, on the other hand, means to make a long-term commitment of putting money away and letting it grow.This involves risk, such as the occasional and inevitable downturns in the market; however, over the long-term (five years or more) those dips are expected to smooth out into an "overall upward growth pattern." Investing is the proocess of using money (called "capital) to buy an asset that you think will generate acceptable return over time, making you wealthier with each passing year .An investment can include anything from a small business to fine art, rare wines to gold coines,comic books to stocks, mutual funds bonds, real estate and antiques ,just to name a few. It can also include song rights,patents,trademarks, or other intellectual property, as it's often called Good investments are the soundest way of growing wealthy but can take time,perhaps even years ,to work out because we live in an certain world.



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