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What is Financial Planning?

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  • Written By: N. Madison
  • Edited By: Niki Foster
  • Last Modified Date: 18 July 2014
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Financial planning is a process of setting objectives, assessing assets and resources, estimating future financial needs, and making plans to achieve monetary goals. Many elements may be involved in this process, including investing, asset allocation, and risk management. Tax, retirement, and estate planning are typically included as well.

Financial planning plays a starring role in helping individuals get the most out of their money. Careful planning can help individuals and couples set priorities and work steadily towards long-term goals. It may also provide protection against the unexpected, by helping individuals prepare for things such as unexpected illness or loss of income.

Financial planning may mean different things to different people. For one person, it may mean planning investments to provide security during retirement. For another, it may mean planning savings and investments to provide money for a dependent's college education. It may even involve making career-related decisions or choosing the right insurance products.

Many individuals choose to use the services of financial planners to help them reach their goals. A financial planner is a professional who provides advice and guidance for a wide spectrum of financial planning issues. Financial planners may or may not be certified and offer varied levels of experience.

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Though a financial planner may make developing a financial plan easier, hiring one is not at all a necessity. There are many books, computer programs, and other resources available to help individuals with financial planning. Furthermore, there is a wealth of related information available on the Internet. The decision to hire a financial planner may depend on many things, including the financial worth of the individual, his or her goals for the future, and the amount of research the individual is willing to perform.

All too often, people delay planning for the future. They may feel such planning should take a back seat to staying financially afloat in the present. However, even those living from paycheck to paycheck can benefit from financial planning by creating a budget. A budget can be used to determine what is actually spent each month and find ways to trim or even eliminate unnecessary or out-of-control expenditures.

The right time to create a financial plan is right now. No matter what your income level or what your hopes for the future, you need a solid plan to achieve your goals. Drifting through life without carefully set goals and well-researched methods of achieving them is a recipe for disaster. To enable your money to offer you more of what you want out of life, start creating a financial plan today.

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Discuss this Article

moneyparadiz
Post 7

Yeah I do agree that setting up the financial objectives is one of the most important part of financial planning. One must analyze one's current financial position and future needs as well as the risk profile to have the best financial plan.

SarahSon
Post 6

I enrolled in a financial planning course at my local community college just so I could get a better understanding of how to plan finances for the future.

I know that things are always changing, but just having a better understanding of the different options available and what they mean can really help when it comes to understanding your own finances. I found it very interesting when studying the historical rates of return on many of the choices you have of where to invest your money.

myharley
Post 5

Many people feel overwhelmed with all of the different financial planning products there are available, and will look for help from a financial planning advisor. This can give you a very good picture of where you are at currently, and how much you need to set aside for the future.

The figures they give you will factor inflation and the rising cost of living. For me it is nice to have this written out and graphs to look at that give me a better idea of the the overall picture is.

anon80987
Post 4

concise and clear explanation.

anon71025
Post 3

so nice. it's very useful.

anon55367
Post 1

very good answers for financial planning.

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