What is Financial Planning
29 Sep 2021

What is Financial Planning

Planning your finances can help you fulfil your life goals and secure your future.

Key Takeaways

  • Financial planning is the strategising of investments to achieve your life goals.
  • It involves different aspects of finance, including income generation, asset allocation for investments, insurance planning, etc.
  • You can determine and fulfil time-specific goals through financial planning.
  • Financial planning also includes tax and retirement planning.
  • You can avail professional financial planning services to make informed investment decisions.

We all have specific goals in life, whether to find the perfect home, go on a world tour, give the best education to our children, or spend our golden years in a beach house. While it is essential to have these dreams, it is equally important to devise a plan to achieve them. You can achieve all the small and big goals of your life with financial planning. Find out what is financial planning in this article.

What Is Financial Planning?

Financial planning is the process of taking a comprehensive look at your financial status and building a detailed investment strategy that helps you reach your personal and financial life goals. It encompasses a myriad of economic activities, from asset allocation to tax planning, buying insurance plans. You can invest in the stock market and bank securities per your risk tolerance levels with proper financial planning.

Different Types of Financial Planning

Having explained what is financial planning, let us look at its different types.

Cash Flow Planning

The inflow and outflow of money are known as cash flow. With cash flow planning, you can calculate your current and future expenditures are formulate a strategy to achieve your financial goals. Cash flow planning also helps you track your income, expenses, and disposable sums for investment purposes.

Investment Planning

Investment planning typically involves identifying and prioritising your life goals. You must create an investment strategy that helps fulfil your investment objectives over different horizons and timeframes in your life, whether they are short, mid, or long-term goals. Depending on your goals, you can choose from mutual funds, fixed deposits, equities, debt, savings schemes, etc.

Insurance Planning

Financial planning also involves preparing for unforeseen and unpredictable circumstances such as loss of employment, permanent disabilities, and death. You must allocate assets towards insurance planning and buy the necessary health, critical illness, and life insurance policies to secure your finances and ensure your loved ones are looked after in your absence.

Tax Planning

Tax planning is another crucial factor that comes under the financial planning umbrella. You must be aware of the various investments to avail tax deductions and exemptions on income. Tax saving instruments can minimise your taxable income while generating higher returns.

Retirement Planning

Your income sources generally reduce when you retire. With adequate retirement planning, you can maintain a comfortable lifestyle during your golden years. Typically, you will need to build a decent corpus on which you can earn interest income. You can create the retirement corpus by investing in equities when you are younger and debt securities in the years closer to retirement.


Now that you know what is financial planning and how important it is, you must create your plan without delay. You may even hire the services of a financial planning expert who can assist you in fulfilling your life goals while you ensure the economic well-being of your loved ones.

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*Disclaimer: This article is for information only. We recommend you get in touch with your income tax advisor or CA for expert advice.