What is Financial Planning & How to make Financial Plan?

What is Financial Planning?

Financial planning means management of income; setting financial goals and allocation of assets across different investment options by keeping in mind the requirements & limitations of own. We can say it the road-map to achieve financial goals. To make a good financial plan we require to analyze our present and future needs.

Why financial Planning?

Financial planning is required for investment Planning, Cash-flow planning, Children’s future planning, Retirement planning, Tax planning, Insurance planning etc.

How to make Financial Plan?

Steps to make Financial Plan are as follows:

  1. Goal setting
  2. Prioritization of goals
  3. Assessment of Current Situation
  4. Constraints determination
  5. Making Future Strategy

Goal Setting: Through goal setting we ensure that for what and how you will do the financial and investment planning. It ensures your path for future investments.

Prioritization Of goals: In this step you give priority to your goals. For example you could give higher priority to your children’s marriage than your summer vacation trip.

Assessment of Current Situation: Before planning your future, you must analyze your present situation. Your future will become strong only on the foundation of strong present situation. To plan your future you should not take high risk on your present.

Constraints Determination: In this step, you require to determine the limitations related to your decision regarding your future planning.

Making Future Strategy: Now you require to make future strategy for your financial plan.

Finally, you should evaluate your plan regularly. Adjusting and modifying the plan according to the changed requirements and conditions.