In earlier days, managing money was not so difficult – high-interest rates, assured returns schemes, Government-sponsored retirement benefits, few financial products, a strong joint family system, a modest lifestyle, and cost of living – all made it simple for a common person to manage his money without any external expertise.
Today, a considerable percentage of urban people have higher household and disposable incomes. Where the income is higher, so are the expenses; things like mortgage planning in Cork are becoming more and more essential for the average man, which led us to the next important question about how people earn money.
In the simplest form, there are three ways of earning money:
- Salary earning (received in return for services provided to an employer)
- Profit earned from a business
- Investment and managing surplus money
The cost of living and aspirations have gone up, putting pressure on income, which has to generate the best return under the given circumstances. People have a scarcity of time in managing their hard-earned money. This is where financial planning as an approach to managing personal finances comes into the picture. The process helps an individual to fulfil life’s numerous goals with available resources.
What do You understand about the term Financial Planning?
Financial planning is a dynamic process that helps individuals and families manage their finances, achieve their goals, and secure their financial future. It’s a roadmap to financial well-being, guiding you through life’s various stages and unforeseen challenges. Challenges like debt, insurance, taxation, etc., financial planning covers almost everything; it offers investment planning, insurance planning, mortgage planning in Cork, etc., to help with the said challenges.
What benefits are offered by Financial Planning?
Financial planning has a lot to offer to those who are ready to dip their toes in the process. However, one must understand the concept, ideology and the process to work with it. Financial planning can achieve the following for the clients:
- Organized finances
- Improve cash flows
- Lower personal income tax
- Plan for retirement
- Plan for education services
- Improve investment performances
- Lower investment risk
- Reduced insurance costs
- Implement various recommendations
Five Essential Factors in Financial Planning
Financial planning is a blanket term for managing finances in different sections of life. The five most important factors are:
- Insurance planning (also includes Mortgage planning in Cork)
- Retirement Planning
- Investment Planning
- Tax Planning
- Estate Planning (Includes inheritance planning)
Insurance Planning
Insurance transfers the risk from an individual to a group. It provides an important means of ensuring risk from interfering with a client achieving their financial objectives. In simplest terms, insurance is a contract between an insurer and the insured. Under this contract, the insurer is generally referred to as an insurance company, and the insured can be an individual or an entity seeking cover. In order to get insurance, the insured party agrees to make a regular payment to the insurer called a premium in lieu of the insurer to cover the financial losses arising out of any unforeseen events.
Mortgage planning in Cork is also sometimes considered a part of insurance planning. Proper planning can be used to shield an individual against potential risks like travel accidents, death, unemployment, theft, property destruction by natural calamities, fire mishaps, etc.
Retirement Planning
People often think that post-retirement life is idyllic. One Can sit back and enjoy all the things that they missed out on during their working years. However, with no regular income, making adjustments and lifestyle changes with the prospect of being financially dependent on others can be daunting.
Post-retirement, people support themselves either through pensions, savings or through their family (earning children). In some countries, the movement provides pension benefits to its citizens. However, these government benefits sometimes do not solve the complete issue. Hence, Retirement Planning is required to plan for the old age in advance.
Investment Planning
Investment Planning is an alien concept for most of the populace across the globe. Investments refer to a commitment of funds to one or more assets that will be held over some future time period. Investment planning has always been a challenging task in any country. The common person, on a generic level, has a certain mindset and an aversion to risk.
Financial planners are required to educate people on concepts of risks and returns and their relationships. Most often, the situation is more damaging as the majority of investors keep their investments in low-yielding fixed income securities or bank deposits. Hence lack of proper finances. Investment planning helps and guides people to manage their investments in a more secure and organized manner.
Tax Planning
Taxes have inherently been a complex and confusing subject. It’s more confusing than Mortgage planning in Cork. To make matters more complicated, the provisions undergo amendments – both prospectively as well as retrospectively – every financial year, making the entire process of understanding the law even more daunting.
Taxes basically represent the sum of money the Government charges at the prescribed rates in place of the various services provided. Taxes are the basic source of revenue to the Government.
‘Tax Planning’ is essentially a legal recourse for minimizing one’s tax liability. It can be defined as a systematic exercise undertaken within the scope of the law to minimize one’s tax liability with the optimum use of available exemptions, deductions, reliefs and allowances.
Estate Planning
Estate planning is an integral part of the process of financial planning. The concept of estate planning is best understood as a process of making proper arrangements for the protection, preservation and provision of a person’s total assets for the benefit of their family and loved ones. Estate for the purpose of estate planning can be simplified to mean all the property and the property rights that a person owns.
Estate planning acts as a very important tool for an estate owner in an efficient transfer of wealth across generations. Reduction of tax liability is not necessarily the primary goal of estate planning. Still, effective tax planning is something that the estate owner should consider in order to reduce tax liabilities on the estate, which could take the form of income taxes, capital gains taxes, stamp duties, etc.
Wrapping Up:
In conclusion, we can say that financial planning is the need of the hour. It is a helpful tool for everyone who wants to gain control over their financial position in current and future times. It is not a lavish activity introduced for the wealthy and financially savvy people. Financial planning, or Mortgage planning in Cork, is for every individual who wants to live a comfortable life without worrying about their finances.
