Why one should do financial planning?

Q. Why do we need financial planning now?

A: About 15 years ago Public Provident Fund (PPF) rates were 12 percent, the bond markets used to give us about 12-13 percent while corporate deposits, fixed deposits were pretty high. India was a different India at that time and we were not as progressive as we are today though whatever you might think of the economic environment and so on. But what has happened is on one side needs have multiplied, the sources of income have gone up but they have not multiplied in the same proportion.

There was a time we didn't have to spend Rs 1000 on mobile phone and an internet connection but today the bear minimum anybody spends is Rs 1000. So there are new expenditures that have come in peoples lives. Because fixed interest instruments gave a fixed rate of return and needs were smaller, inflation was under control and not as volatile as it is now, things were okay, our parents could happily manage their affairs."
So even if you have a pensioner right now who is getting a super annulation, he is still making about 7-8 percent annuity. By the time you and I retire we will be at 2 percent and 3 percent that is what makes everything so much more complicated. So the need to beat inflation or to have inflation plus returns is so much more pronounced now than it was ever before which is why this entire shift to doing something more scientific, doing something more organised, identifying where cash flows are going because needs are multiplying. Children need to do more things, we want to do more things, holidays, retirement, exposure, there is just so much more that we have on our agenda which is why the need for doing something more scientific.