What is a financial plan?
A financial plan is a document that list your future financial requirements and maps out a path what to do or how to pursue meeting these goals. Creating a plan provides clarity on path to take action by eliminating guesswork out of the equation. But like any other plan, a financial plan also needs to be reviewed from time to time to understand whether they are off track and take corrective measures to adjust.
“Failing to plan is preparing to fail,” as Alan Lakein memorably said. Every individual works hard to earn money to save for their family’s future requirements, but only keeping is not enough. Investing the saved cash into appropriate and suitable investment options is the key to securing the financial future. Different individuals have different requirements depending upon their income, expenses, and risk appetite.
6 Steps to develop a Comprehensive Financial plan
Step 1: Gathering inputs to asses current financial standing
Step 2: Identifying future Goals and Objective with time Horizon.
Step 3: Analyzing information gathered with risk tolerance.
Step 4: Develop and present financial Plan.
Step 5: Implement agreed up on financial plan.
Step 6: Monitor the Plan.
Financial planning is a dynamic on-going process that requires continuous monitoring. Review of the actions recommended in the plan should take place regularly, and the goals should be reviewed annually to take account of a change in income, asset values, business or family circumstances.
Conclusion
“People often confuse financial planning with investing, but financial planning is much broader than that,” said Noel Maye. Financial planning is a holistic and all-encompassing approach towards the financial journey, which involves keeping track of spending, expenses, budgeting, risk tolerance, and retirement planning.
As has been rightly saying, “Life is inherently risky. There is only one big risk you should avoid at all costs, and that is the risk of doing nothing”, so do not sit still by doing nothing. Instead, secure the financial future by making a financial plan if one has not already done so.
