What is Financial Planning and Why is it Important?

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 According to google Financial Planning is the long-term method of wisely managing your finances so you can achieve your goals and dreams while at the same time negotiating the financial barriers that inevitably arise in every stage of life. In order to create a sound financial plan, goals must be first established.


Essentially, Financial Planning helps us to be in control of our income, expenses, and investments so that we can achieve our goals.

So where do we start? Here are the 4 Financial Goals that you can start with.

1. Income Protection - According to study, if you are a breadwinner or the provider of the family, you at least must have 10x of your annual income set aside, this way just in case anything happens to you as a breadwinner, the family that you leave behind will have at least 10 years worth of the income to use. This will give them the chance or the time to recover from the loss and be able to establish a life without the breadwinner.


2. Health Coverage - This one shall cover the expenses for Critical Illness and Hospitalization. It is advisable to have at least 5x of your annual income as hospital bills nowadays are very expensive and you would not want to worry on how to pay for those as you recover from an illness.

3. Education Fund - This goal is for people who have young kids. College education can be very expensive depending on what school you want your kids to go to. As of now, you need to have at least P1,000,000 to P2,000,000 to get your kids through college. There are a lot of things to consider when sending our kids to school - Tuition, Uniforms, Books, Daily Allowance, and other fees that comes up along the way. If we want the best education for our kids, we start saving for it while they are still young. 


4. Retirement - If we want to stop the Sandwich Generation, we need to start saving for our retirement fund. If you want to retire at the age of 65, you need to start saving for your retirement for at least 20 years, for you to have a comfortable retirement, without needing to ask for support or to still work. 



On top of these goals, you also need to establish an Emergency Fund - 3 months worth of your Income if you are employed and 6 months to 1 year worth of your income if you are a business owner. The reason for this? A lot of things can happen - you could lose your job - be fired or you could lose your business - get bankrupt, among a lot of other reasons and you do not want to spend the money you have saved for your goals to get by on a daily basis. I know adulting is hard, but it is much harder if you do not prepare and save. We cannot just sit back and rely on luck, we should make our own luck. 

If you want a thorough and sound financial planning you can contact me, send me a message here, on facebook, or email me here - KARLACRISTINA-D.DIMALIUAT@aia.com.ph. I am Licensed Financial Advisor and I can help you start at least one of these goals. 

Rooting for you!!!

Love, Karla

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