What Is Financial Planning? Definition, Meaning, And Purpose

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Grip Invest
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Mar 31, 2024
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    Financial planning is a perfect tool for securing your future. It focuses on dealing with your funds smartly, making better investment choices, and achieving your monetary goals. It enables you to make the most of your existing funds. 

    Read on to learn about financial planning and building a sustainable financial plan by following simple steps.

    Financial Planning – An Overview

    Financial planning includes evaluating an individual's current monetary circumstances and setting future objectives. It guides the individual’s economic growth, laying out its current status and building strategies to achieve it. Budgets are a small part of the plan but not the comprehensive plan. A financial plan incorporates point-by-point breakdowns of resources, costs, and cash flow.

    What Is A Comprehensive Financial Plan?

    When a person or organisation's financial needs are met, their financial resources can be managed comprehensively. Financial planning includes budgeting, paying off debt, saving for immediate and future needs, investing in equities, bonds, and other assets, preparing for retirement, and leaving a lasting legacy.

    A thorough financial plan is analogous to a road map for one's financial resources. This comprehensive plan may help you better manage your funds. It encompasses making a plan, sticking to it, saving money, investing, and budgeting. How you spend your money is just as important as how you earn. Whether you are saving for a down payment on a home, retirement, or just getting out of debt, this will be a helpful tool in getting you there.

    Steps To Make A Financial Plan

    Given below are some tips to create financial plan -

    1. Determine Your Net Worth – To start financial planning, list your investments and properties and subtract all debts owed. This gives your net worth. You should also learn about the types of financial planning to build better goals and strategies.

    2. Control Your Spending And Minimise Debt—A financial plan must include a strategy for handling expenses and debt. Make a list of all your costs and create a budget to cut back on them. As you work to pay off your debt, prioritise paying off your loans, if any, with the highest interest rates.

    3. Minimise Potential Risks- Being ready for potential risks is vital because life is full of surprises. Examples include acquiring insurance, making a will, and naming beneficiaries on financial accounts.

    4. Incorporate A Tax Plan—Including a tax strategy in your financial plan is crucial because taxes can significantly impact it. Contributions to tax-deferred or IRA accounts and investments in tax-efficient accounts may fall under this category.

    5. Consider Some Investments—Determine your investment objectives and risk-taking capability. To spread your risk, consider portfolio diversification through stocks, bonds, securitised debt instruments (SDIs), and mutual funds.

    6. Track And Adjust Your Financial Plan—The first step is creating a budget. You should review and adjust your strategy frequently as your circumstances evolve. This may necessitate reorganising your assets, including your investment portfolio and financial and estate plans.

    How Much Money Is Needed For Financial Planning?

    The cost of financial planning services varies depending on the advisor and their fee structure. Advisors offer services on an hourly or flat fee basis. With a flat fee, you pay one price for the entire financial plan. On the other hand, an hourly fee involves paying for each hour of the advisor's work.

    A few advisors give investment services and financial planning under a wrap charge. This involves a single rate covering the advisor's services. It also includes custodial fees and transactional fees. The wrap fee is often a percentage of the client's assets under management (AUM).

    When considering financial planning, it is vital to understand the charge structure and how it adjusts to your needs and budget. Comparing expenses among advisors can help you find the best value for the services you require. It can also guarantee that you get quality advice without overpaying.

    Tips To Ensure The Best Financial Plan

    Some tips for creating the best financial plan are:

    • Create a budget to supervise and manage your expenses and savings. Budgeting also helps you track and manage investments effectively. The cost of financial planning should also be considered while budgeting.
    • Consider diversifying your investment portfolio by investing in multiple assets, such as stocks, mutual funds, fixed deposits, or alternative investment channels.
    • Make sure health insurance covers you and your family to reduce unexpected expenses.
    • Explore the National Pension System (NPS) for market-linked investments with tax benefits and post-retirement pensions.
    • Start your investment journey early; this may provide better returns with the power of compounding.


    Financial planning is like mapping a journey to ensure you reach your destination safely. Starting early on your financial planning eases the process. In addition, it significantly boosts your chances of hitting your financial goals. But keep in mind it is not just about having a plan. You must also put that plan into action to gain the desired results.

    Explore Grip Invest and stay updated on all relevant and best investment opportunities. 

    Frequently Asked Questions On Financial Planning

    1. What is your definition of a financial plan?

    Financial planning is about making a roadmap for expenses and income management to achieve your monetary goals.

    2. What is the financial purpose?

    A financial plan provides the proper strategy for managing money and assets. It will help you attain your financial goals and achieve better long-term returns.

    3. What are the types of financial planning? 

    The most common types of financial planning include - 

    • Tax planning
    • Budgeting
    • Investment planning
    • Retirement planning
    • Insurance planning
    • Education funding planning
    • Estate planning

    Want to stay at the top of your finances? 

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