5 Must Haves That a Financial Plan Should Carry
A financial plan is nothing but a tool that helps one to get the financial facts about which a person is not aware or in doubt. The word “financial plan” sounds quite familiar however it has different definitions.
There are a number of reasons for which people often choose several financial plans and the plan varies according to the person’s requirement. The financial plans of a business owner are not at all analogous to a service man. A business person makes plans to run his business successfully and gain greater revenues while a serviceman plans it for post retirement life. But there are some common factors that every financial plan should carry along. Some of these are lined up below.
1.The plan must provide security for retired life: People always prefer to take a financial plan that well deal with the retirement necessities and provide security in addition. This is very important mainly for those people whose retirement income is less than their regular expenses.
2.The plan must offer scheme to deal with the chance of losing money: Life and uncertainty go side by side and one can never estimate at what point of time he will be losing money. Therefore he must make it sure that the financial plan he has adopted will compensate him in that situation. Most of the plan offer Monte Carlo simulation that helps one to get the actual situation however an individual should be aware of the fact that the simulation is not provided for every situation.
3.Enough rate of return to fulfill demand: Making a financial plan is nothing but making the way to reach the goal smooth and profitable. While taking up a financial plan, one must be sure of its returns. As it is a form of investment, so, the return is always expected to be more than the venture. It is always best to make the funds when an individual is hundred percent sure about greater returns. Unless and until the financial plan assure fair return it is better not to adopt it as it includes huge risk factor.
4.The plan should ensure either increasing or constant value of income but not at all declining:There can be nothing better than this if one can compute the expected value of the income. The income is then to be compared with the policies and what they bring up to date. If it is found to be declining over a year, taking the step back is strongly suggested. But if the plan offers a constant or increasing value then moving forward is worth it.
5. It should be consisted of debt ratio: Debt plays a very important role in everyone’s financial life. It is something that is needed to execute small desires and on the other hand excess debt brings in a tough situation. Maintaining a proper debt ratio is a must for a financial plan and one should be careful of that.
Actually there are a number of financial plans and one needs to pick out one according to their specific requirements. But before moving the steps forward one should assess the plan from the grass root level.
About Author: Naresh is a business finance specialist providing financing advice and assistance to small and medium sized businesses. To get more information on the topic My Business Loans go visit factoring in Australia .
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Category: Financial Planning
