What is Financial Planning?

What is Financial Planning

Financial Planning is a process of assessing the financial goals of a client that arise at different intervals in his life taking into account an inventory of the investments and other assets he already has to help him achieve those goals and estimating what he will need in the future.

The objective of financial planning is to ensure that the right amount of money is available to the investor at the right time to enable him to meet the different goals in his life.

There can be numerous financial goals such as:

  • Purchasing a Flat after 5 years with accumulated funds worth INR 20,00,000 and the balance with a loan.
  • Saving to buy a car costing around INR 5,00,000 after 2 years
  • Investing for Child’s higher education where the requirement of funds will be after 10 to 15 years.
  • Family Protection through General and Life Insurance
  • Retirement planning to meet the expenses and maintain the status of living in the Zero-salary age after say 30 years.
  • Investments for Tax Saving
  • Estate Planning

Financial Planning is broader term and not just Investment Advisory and Planning.

Financial Planning is a comprehensive process that covers all the aspects of a client’s financial well being from wealth creation to wealth protection; selecting appropriate products to suit specific needs; monitoring and reviewing financial position at various stages and regular intervals and revising the plan as required from time to time.

Put in simple terms, Financial Planning is arranging finances keeping in mind the financial goals-the goal oriented approach and mapping out appropriate strategies to realize them as defined by the client.

Financial planning is an inclusive approach which includes –

  • Using a monthly spending plan or budget to keep finances on track
  • Making decisions about the job and its benefits
  • Getting the most out of other financial resources, including insurance and employer provided benefits
  • Saving and investing money
  • Controlling expenses and staying out of debt
  • Planning for estate transfer
  • Planning for transferring wealth to the next generation.
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