The old saying, ‘save your penny for the rainy day' finds implications in every life. Retirement is a phase when one's monthly source of income suddenly comes to a stop. A person becomes dependent on the sum of money he receives as pension. A sudden halt in the lifestyle one has been pursuing since so long often creates tension as one starts feeling financially insecure.
In order to avoid this financial insecurity comes in the need for an efficient financial plan- a plan that helps one attain financial freedom after retirement. A financial plan is a strategic process of creating and managing wealth all through out the time when a person is in earning stage so as to meet all the financial goals in life. It is a procedural action and hence needs systematic planning.
A financial plan takes into account one's specific financial situation, his earnings, responsibilities, likes and dislikes, fears, hopes, aspirations and concerns. It helps in determining one's safety and liquidity requirements.
The entire process of preparing a financial plan can be divided into four broad steps:
Need analysis refers to knowledge of where one is today (financially) and where does he see himself tomorrow in terms of needs and requirements.
One needs money for all the leisure activities, vacations and trips that he has kept on hold till he gets free finally from work. There are a hundred and one expenses that need to be met after retirement. And they require proper management and planning.