Financial planning is all about putting money into a structure in order to achieve various financial goals. It is done by taking a holistic view of each and every aspect of money as well as life. It is a process-oriented approach that helps in organizing and managing finances in a goal-based approach.
Financial Planning is quite important for professionals like doctors. The reason being, that you earn decently which may tempt you to spend more. Also, looking at the surplus you generate, every other person be it a banker, insurance agent, etc. tries to sell you unwanted and complex products that are unsuitable for your financial goals, and requirements.
In the same way, you take good care of your patientís health, you must take care of your financial health too. Financial planning helps you in maintaining your financial health in various ways.
Here are the 7 benefits of financial planning for doctors in India:
Cash flow management is one of the most important aspects of the financial planning process. In this exercise, the financial planner takes into consideration the present income and expenses and tries to make arrangements for the savings required for the future financial goals from the surplus generated.
If the cash flow surplus is not enough for the goals, the financial planner tries to optimize the savings by paying off high-interest loans, discontinuing low-yielding insurance policies, checking the unnecessary expenses, etc.
In addition, the financial planner analyses the numbers and tries to efficiently allocate and manage the limited surplus towards the achievement of financial goals.
The whole financial planning exercise revolves around goals. Before carrying out this exercise, it is really important to set financial goals.
Once the destination (financial goals) is known, it is easy to create a roadmap (financial plan) to reach there. Without knowing the destination there is no use of a road-map, it will lead nowhere.
Doctors might have various financial goals for which they want to save and invest their money, for instance, setting up their own practice, buying a home, kids' higher education, retirement planning, etc.
It is also important to prioritize the goals and allocate the cash flow surplus towards important goals first like- retirement, kids' higher education, etc., and then towards the discretionary goals that can be postponed like- buying a home, setting up the practice, etc.
Financial helps you come out of the unsuitable investment products and lets you into the investments that are suitable to your risk profile, financial goals, and requirements.
Different investment avenues are assigned for short, medium, as well as long-term financial goals, and planning is done accordingly.
For the long-term goals, the financial planner follows an appropriate asset allocation strategy and allocates assets into unrelated asset classes, after analyzing the investor's risk profile. It not only helps in managing the downside risk to the portfolio but optimizes returns too.
Also, when the goal comes near, the financial planner tries to shift the investment portfolio toward the safer investment avenues in a phased manner so that the accumulated corpus remains intact when the goal arises.
The financial planning process is not only confined to investments, protection planning, and risk management is an important element in the overall process. In fact, it is the foundation stone on which the financial plan stands.
The adequate term, health, personal accident, and in doctorís case professional indemnity insurance, too are important essentials to manage unforeseen events in life.
In addition, the other aspect of protection planning is the emergency fund. This fund should comprise at least 6 to 12 months' expenses and be kept in safe instruments like- Bank FDs, or liquid funds to tackle any sort of emergencies.
The financial planning process even gets extended to Tax and Estate Planning as well.
The financial planner tries to optimize the tax outgo by taking advantage of the available tax deductions and exemptions.
Estate planning involves the preparation of a WILL or creation of a Private Trust in order to manage, and distribute your assets among your loved ones in the manner you desire after your demise.
So, financial planning is a life-long process that continues even after you are not there.
Financial planning, as mentioned earlier checks reckless spending and inculcates good financial habits, thereby bringing financial discipline into your life.
You prepare a budget and try to stick to that. You invest regularly with a goal in mind and continue the same without timing the markets.
Through the financial planning exercise, you try to find a balance between your present needs and future goals. You make provisions for the future without compromising on your present.
By following the financial planning process you are letting your money work on its own. You need not worry about money matters. Financial planning makes you understand your current financial situation and helps you take the right financial decisions.
It will help you see the complete picture of your financial life and make sure that you are going in the right direction to achieve your financial as well as life goals. It brings clarity, focus, and peace of mind as well.
Financial Planning can help Doctors attain multiple benefits. With a trusted and reliable Financial Advisor Doctors can easily achieve their Financial Goals and accomplish true Financial Freedom. Moreover, hiring a Financial Planner can also help doctors relieve the stress of relying on friends, and relatives for financial management and investing in inadequate assets.