Financial planning is the process of creating a detailed and comprehensive plan of action to meet financial goals. Throughout this process, the individual outlines the steps and takes the necessary actions to achieve their finance-related goals.
- This plan outlines the various techniques and strategies to be implemented in order to meet financial This includes strategies such as proper investment mix, risk management techniques, and taxation planning. This plan must be flexible, with the ability to change as the individual’s life and goals change.
A financial plan ensures that the individual or family is financially prepared for the future. This plan is set in place early in the individual’s adult life, allowing the person to meet their financial goals as planned.
Financial Planning – Restrictions
A financial plan is often restricted by the resources and opportunities of the individual. Most financial plans are limited by financial resources such as expensive living costs and low-income labor opportunities.
Financial Planning – Goals
Before creating a financial plan, the individual or family should establish financial goals. The financial goals are the purpose for the financial plan. The financial plan is created to help the family and individuals reach their financial goals. Financial goals often include the following:
- College education – saving for a college education is a major expense that should be included in the financial plan.
- Living expenses – financial stability to afford the cost of living is a common financial goal.
- Retirement – saving enough to afford a comfortable retirement is a common financial goal.