Home comprises of people who have close blood relationships and live together in the same place called house. Thus, the financial management is an inevitable process through which only the needs and wants of the members of the family can be satisfied. There will be age difference between the members so that the nature of the needs and wants of each member varies.
The leader of the family, in India since a patriarchal system is followed; father being the leader of the family has to plan the expenses on a regular basis. The expenditure corresponding to the income of the family is planned and estimated in such a way that no liabilities or debts are formed. Hence, the planning of financial expenditure after analyzing the periodical need satisfaction of a family can be termed as financial planning of a family.
Financial planning also includes the saving plans, taxation aspects, earning capability assessment, investment planning etc… If proper planning is done, you can achieve your life goals in such a way that the money you earned is appropriately spent for the achievement of your goals. The budget formation is another important advantage of financial planning which helps the planner to direct the channel of expenditure in the calculated terms only.
The cash flow will not be channelized which is detrimental to the achievement of your life goals. Since the cash flow is properly channelized, it amounts to increase in the savings which later can be directed as capital formation. This capital can also be used for the improvement of financial well-being through different business or fund raising activities.
Proper financial planning gives the planner the précised understanding about the financial situations so that unnecessary expenditure can be reduced and high liquidity can be achieved. This type of money can be saved for the utilization in emergency situations.