Financial planning a basic necessity

They say life is all about surprises. Whatever one might plan for still could face a bouncer at the most unplanned times. But by failing to prepare one is preparing to fail. So, with preparation one could hook those bouncers (in cricket parlance) with confidence and élan. This is why financial planning takes a centre stage while planning for life’s events whether planned or unplanned. I take advantage of the current T20 world cup excitement, to explain the financial planning process.

Coach - The match begins much before the toss of a coin. There’re innumerable number of strategies that consider the pitch, the opposition, the strengths and weaknesses of the team. Also, under consideration is the pace of the match, the contingency, the attacks and counter-attacks during the match. Most of these are derived by the head-coach in support from the other staff, the captain and the management. Likewise, one has to choose a financial advisor, the earlier the better but having one is critical for success.

Pitch - The pitch forms a significant factor in deciding the result of the match. The pitch could offer assistance or hurdles to the players. Risks are inherent and like pitches they either present opportunity or threat to an investor. In financial planning, the assessment of risk plays a pivotal role in the further derivation and then the execution of a plan.

Right Mix - The proper risk analysis allows the advisor to allocate the assets in the most suitable fashion that augurs well with the investor. It not only generates good returns but also acts a buffer in times of volatility. This is similar to picking up the most suitable team to play on that particular surface.

Vision - In a cricket match, the toss presents an opportunity and whichever way the result turns out to be at the toss, the team gets ready with the eventuality i.e. either to field or bat first. The approach to both events is well-envisaged in advance so that within minutes the team gets into the motions of the game. If one were to bat first, the team sets small targets for a few overs and adjusts their game accordingly. Similarly, one needs to create a financial plan, a comprehensive vision encompassing the various needs, with a defined set of timelines and hence setting goals. These goals act as milestones while accumulating wealth to the investor.

Balance - A most important aspect, at times missed out by the teams, is having a right balance of players i.e. spinners, pacers, batsmen, etc. that suits the pitch. It is also equally vital to have a good balance of financial products that address the various needs and in tune with the risk profile of the investor. A financial plan of substance actually addresses this so that the investor is benefited during the implementation. Also, the advisor could weed out the unnecessary or unfit investments which were earlier done to have a robust and agile plan.

Succession - This is another pertinent problem faced by most cricket teams. Once the veteran players leave, the golden era seems to fade away with a struggle from the bottom for the newer players. An inclusive financial plan also considers a will and estate planning. This way, the investor could lay out a well define guidelines for not distribution of property but also consider structures like trust to continue the good work of the deceased.

Thus, a financial plan is not just a key for success but a basic necessity for achieving various goals seamlessly.

(The author is a practising financial planner and could be reached at [email protected])