Hard work, luck and talent are some of the important factors that contribute to achieving financial success. By financial planning is an entirely different ballgame for which one needs proper planning and assistance from professional investment advisory firms like Arbor Financial Melbourne. To be financially secured in their requirement years, one needs to progress towards financial freedom through a range of well-planned strategies. While developing this plan can be complex for many, its components largely include the important pillars of financial planning, which are investments, income planning, insurance, and tax planning.
Proactive planning is needed to achieve any goal. One cannot reach their road trip destination without knowing the distance involved, the route to follow and the travel time necessary. Similarly, one cannot attain financial freedom without adequately planning for it. The assistance of companies like Arbor Financial Melbourne and smart strategizing is crucial to charting the journey to financial freedom.
Financial planning is essentially an umbrella term that involves multiple components linked with the financials of a person. Here are some of its most important pillars:
- Investment: Choosing the perfect investment vehicles to put your money in is a crucial aspect of financial planning. Reaching financial freedom by putting in all the money in a single investment avenue can be pretty difficult. Hence, proper emphasis needs to be maintained on asset allocation. This simply involves the process of spreading the hard-earned money on diverse investment instruments like stocks, bonds, commodities and gold, rather than putting all the eggs into one basket. The amount of money allotted to each of these instruments shall vary on different factors, including interest rates, inflation, and global market conditions.
- Income planning: This involves the process of developing a strategy to determine how much income shall one need to live the retirement lifestyle one desire. While for some this may involve cutting down their expenses, for a few others it can mean making provision for travel plans. In many ways, income planning can be pretty similar to creating and implementing a cash flow plan. While trying to formulate these plans, one needs to estimate the amount of money they shall need after their retirement, determine their sources of that income, and start with a reasonable withdrawal amount.
- Insurance: This broadly implies to risk management. It allows people to protect themselves against potential loss and financial hardship by investing in distinguished insurance policies. The types of risks faced by people can be numerous, right from getting into a major car accident to suffering from a severe illness. In addition to their life and health, it is also imperative for people to keep their vital assets like home and car insured to avoid dealing with any major financial loss associated with them.
In addition to the pointers mentioned above, tax and real estate are also vital aspects of financial planning that people need to take into consideration.