Financial Planning Guide To Set Financial Goals &Savings Plan |MetLife Bangladesh

Definition of Financial Planning

What is Financial Planning?

Financial planning typically includes evaluating an individual's or organization's income, expenses, investments, debts, insurance, and tax obligations. Based on this analysis, a financial plan is created that outlines specific actions to be taken to achieve the identified financial goals, such as saving for retirement, paying off debt, or investing in a new business venture.

Financial Planning for Life Goals

It involves assessing your current financial situation, developing a strategy to achieve your goals, and monitoring your progress over time: Here are some ways by which you can create a financial plan that aligns with your life goals:

Wealth Creation

Wealth creation is the process of accumulating assets over time to build financial security and independence. Financial planning is a crucial component of wealth creation, as it helps individuals develop a roadmap to achieve their financial goals.

Retirement planning

You should start your Retirement planning as soon as you start earning. You can save some money each month and can easily reach your desired retirement objective. When you have a specific number in mind as a goal (calculated logically using anticipated expenses, income, etc.), you'll get into the habit of saving towards it in a sustainable and disciplined way.

Child’s education

Due to inflation and growing demand, quality education is becoming expensive, and it is rising day by day. You can develop savings plans by setting a goal to reach a certain amount by the time your child turns 15 or 18.

Saving tax

Financial planning addresses the goal of reducing your income taxes with tax deductions, tax credits, tax loss harvesting, and any other opportunities that are legally available to taxpayers.

Unforeseen emergencies

Emergencies don’t come with a notice of warning. Damage to house or equipment, illness, accidents, etc can strike anytime and need cash in hand immediately. Keeping all money in illiquid assets such as land, bonds, etc will not help. Setting aside some money in savings accounts, and fixed deposits (FDs) that can be withdrawn quickly can be useful in building your emergency funds.

Understanding Financial Planning

The ultimate goal of financial planning is to ensure that you have enough money to meet your financial needs and live the life you want. It involves analyzing your current financial situation, setting goals, and creating a plan to achieve those goals. Here are some key components of financial planning:

How Financial Management works

A financial management system is the software and processes used to manage income, expenses, and assets in an organization. In addition to supporting daily financial operations, the purpose of a financial management system is to maximize profits and ensure long-term enterprise sustainability.

Importance of Financial Planning

Financial planning is an important process that involves creating a plan for how you will manage your money, including how much you will save, how much you will spend, and how much you will invest. Here are some of the key factors indicating importance of financial planning:

To tackle inflation

Some assets, such as real estate, stocks, and commodities, tend to appreciate as inflation increases. By investing in these types of assets, individuals and organizations can protect their wealth against inflation.

To create a contingency fund

A contingency fund is an emergency fund that can be used to cover unexpected expenses or financial setbacks, such as job loss, medical bills, or home repairs. Creating a contingency fund requires discipline and commitment, but it can provide peace of mind and financial security in the face of unexpected events.

To create a retirement corpus

Creating a retirement corpus requires careful planning and consistent savings and investment strategies. By determining their retirement goals, estimating their retirement expenses, developing a retirement plan, maximizing their retirement contributions, investing for long-term growth, and reviewing and adjusting regularly, individuals and organizations can build a retirement corpus that provides financial security and independence during retirement.

To manage your money (income management)

Managing your money effectively is an important aspect of financial planning. It involves creating a budget, tracking expenses, and making informed decisions about saving and spending during financial insolvency.

To get an enhanced return on investment

Create a diversified investment financial plan that includes a mix of asset classes such as stocks, bonds, and real estate. This can help reduce your risk and potentially increase your returns.

Type of Financial Planning

It is crucial to keep in mind the potential risks and rewards while you make any financial decisions. There are many areas in life where financial understanding is required, but some of the most typical ones are as follows: -

Cash Flow Planning and Budgeting

Cash flow can be defined as the inflow and outflow of funds. Cash flow planning refers to the process of identifying the expenses in present and future by keeping in mind short and long-term goals and thereafter making planned investments.  

Insurance Planning

Insurance planning can help you create a safety net that will be useful when difficulty arises. The goal of this sort of planning is to guarantee adequate protection from insurable risks. But you need the expertise to calculate the right level of risk in plans.

Term Life Insurance

By selecting life insurance, you can ensure that your loved ones will be financially secure even on an uncertain situation. Life insurance comes in a variety of forms, and each one has unique features and advantages. Term life insurance pays the agreed-upon amount in case of your demise during the policy's term but does not provide a survivor benefit.

Critical Illness

Critical Illness Insurance Protection Plan provides a lump sum payment in case of serious sickness. You can use the money to replace income if you are unable to work or to assist with paying for medical care.

Retirement Planning

Retirement planning makes it easier to determine how much money you'll need to have saved up so you can live secured retired life. This covers elements like, how much money you intend to spend, and the kind of lifestyle you wish to maintain.

Bangladesh Pension System (BPS)

The BPS is a contributory pension scheme that is available to all permanent government employees in Bangladesh. The scheme is managed by the Government Pension and Investment Unit (GPIU) and provides retirement, disability, and survivor benefits to eligible participants.

Employees' Provident Fund (EPF)

Employees' Provident Fund (EPF) is a retirement savings fund for employees in Bangladesh. It benefits employees and helps them save for their future. It is a good option for those who do not have access to other retirement savings schemes or pension plans.

Unit Linked Insurance Plan (ULIP)

Under a ULIP policy, a portion of the premium paid by the policyholder is allocated towards insurance coverage, while the remaining portion is invested in various market-linked investment options such as stocks, bonds, and mutual funds.

Equity Stocks

Investing in equity stocks can be a good option for those looking for long-term growth and higher returns, but it comes with risks. The value of stocks can go down, and there is no guarantee of returns. It's important to conduct thorough research and analysis of the companies before investing in their equity stocks and to diversify your portfolio to minimize risks.

Investment Planning

Investment Planning can assist you in determining how you want your money to work for you. You anticipate that your money will be there for you when you need it to achieve your goals at different life milestones.

This includes regular saving and investment planning as well as preparing ahead for needs like retirement, buying a house, health care, and children's education.

Tax Planning

Tax planning in Bangladesh involves developing a strategy to minimize the amount of taxes you owe while remaining compliant with the country's tax laws. You have to pay tax for some investments and some tax-exempted ones on maturity. Look for instruments that fall under the Exempt-Exempt-Exempt (EEE) category.

Benefits of Financial Planning

There are numerous benefits of financial planning, both in the short-term and long-term. Here are some of the key benefits

Thorough examination of your income and spending

Based on your current financial situation and your financial goals, create a budget that works for you. This should include your income, expenses, and savings & investments goals.

Improve understanding of your financial circumstances

By creating a financial plan, you can have a clear idea of what you need to do to achieve your financial goals and the steps you need to take to get there.

Establishes important short- and long-term financial goals

With a financial plan in place, you can make better financial decisions based on your long-term goals and priorities, rather than making impulsive decisions that could hurt your financial future.

Planning actions to achieve your various financial goals

Financial planning helps you set specific financial goals and create a plan to achieve them. This could include saving for retirement, paying off debt, or saving for a down payment on a house.

Place focus on important immediate steps, e.g. as reducing debt

Financial planning helps you create a budget that works for you, which can help you manage your cash flow more effectively. This can help you avoid overspending and debt, and ensure you have enough money to cover your expenses.

Keep you out of financial trouble, and reduce the stress and worry

Having a financial plan in place can reduce financial stress and anxiety, as you have a clear idea of what you need to do to achieve your goals, and are more confident in your ability to handle unexpected expenses.

Financial Planning Tips & Guide: How to Create Financial Plan

Creating a financial plan can seem overwhelming, but breaking it down into manageable steps can make the process much easier. Here are some tips and guidelines to help you create a financial plan:

1. Understand your current financial situation

Start by identifying your short-term and long-term financial goals. This could include saving for retirement, buying a house, paying off debt, or starting a business. You should be aware of your goals and expenses to get exact idea of your financial situation

2. Write down your financial goals

Look at your income, expenses, assets, and liabilities. This will give you a clear picture of your current financial situation and help you identify areas where you need to make changes

3. Look at the different investment options

Determine the best investment options for you based on your financial goals and risk tolerance. This could include stocks, bonds, mutual funds, or real estate.

4. Implement the right savings and investment plan

Determine how much you need to save for retirement and create a plan to achieve your retirement goals. This could include contributing toVPF,(Voluntary Provident Fund) and adjusting your investment strategy as you get closer to retirement.

5. Monitor your financial plan regularly

Your financial situation and goals will change over time, so it's important to review and adjust your financial plan regularly to ensure it stays on track.

How to start the Financial Planning journey with MetLife Bangladesh

MetLife Bangladesh offers a range of savings and investment plans and insurance plans that can support your financial planning journey. Here are some of the plans available:

Endowment : At “MetLife” Endowment provides guaranteed returns and can help you save for future financial needs.

My Child’s Education Protection Plan (MCEPP):At “MetLife” My Child’s Education Protection Plan (MCEPP) helps you save for your child's education and  protect them from the uncertainties of life.

LifeLine: This is a retirement plan at “MetLife” helps you save for your retirement and provide regular income in your retirement years.

MetLife Fixed Deposit Protection Plan (MFDPP):MetLife Fixed Deposit Protection Plan (MFDPP) is an investment plan that allows you to enjoy world-class insurance benefits with affordable one-time premium payments.

 MetLife Depositors Protection Scheme: MetLife Depositors Protection Schemeis a life insurance plan that provides financial protection to your family in the present and future.

Critical Care: Critical Careis a special rider that provides financial protection in the event of a critical illness, such as cancer or heart attack.

Frequently Asked Questions (FAQ)

When should I start creating a financial plan?

It's never too early or too late to start creating a financial plan. Ideally, you should start creating a financial plan as soon as possible, regardless of your age or financial situation. If you're just starting in your career or mid-career or retirement creating a financial plan can help you establish good financial habits early on, such as saving for retirement and avoiding debt.

What is the main purpose of financial planning?

The main purpose of financial planning is to help individuals and families achieve their financial goals and secure their financial futures. The process of financial planning helps individuals evaluate their current financial situation, identify areas where they need to make changes, and create a roadmap for achieving their financial goals.

How do I establish my financial goals?

Financial goals can change over time, so it's important to review and adjust them as necessary. By establishing clear financial goals, and by determining your priorities & timelines, you can create a roadmap for achieving your financial dreams and securing your financial future.

Where can I get professional advice from a financial advisor?

When selecting a financial advisor, it's important to do your research and choose someone who has the expertise and experience to help you achieve your financial goals. Look for a financial advisor who is a Certified Financial Planner (CFP) or holds another relevant professional designation. You should also consider their fees, investment philosophy, and track record when making your decision.

What are the savings and investment plans or insurance plans at MetLife Bangladesh that can support my financial planning journey?

“MetLife” Bangladesh offers a range of savings and investment plans and insurance that can help you achieve your financial goals and secure your financial future. Contact MetLife Bangladesh to learn more about these plans and determine which ones are right for you.