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What is Comprehensive Financial Planning Process - Basics?

 Administrator  01-09-2017   02-12-2017

 What is Comprehensive Financial Planning Process - Basics 

Comprehensive Financial Planning is done by taking the family as the end beneficiary of the whole process. Financial Planning is the process of achieving your financial goals through the optimum utilization of your finances. This ensures better control of the life situation of the family. These plans are constructed after analyzing your family, dependents, income, expenditure, assets, liabilities, career plan, your needs and aspirations. Some factors important for Comprehensive Financial Planning.

  • Your wish to plan your life.
  • Identification of your family’s life goals.
  • Evaluation of all the information financial and non-financial which affect your financial situation.
  • Identification & fixation of your family values.
  • Choosing and deciding the best practical strategy.

What is a Financial Plan

A financial plan acts as a road map in your financial journey for achieving financial goals. A financial plan takes into account:

  • Your current net worth which is arrived at by subtracting your obligations from your assets and the investments.
  • Financial goals of your life.
  • How much money you require and when.
  • Risk Appetite.
  • Investment Avenues i.e where you can invest to achieve your financial goals.

Role Of Financial Planner

A Financial Planner is a neutral or unbiased person who uses the Financial Planning Process to help you figure out how to meet your life goals. The Planner understands your financial situation and make a Financial Plan that is suitable for you. The Planner spends a reasonable amount of time in building a relationship that increases the level of engagement on your part, which is a necessary condition for an effective financial plan. The Planner helps you identify and quantify your needs in life by helping you prioritise your goals. The Planner help you in your

  • Cash flow management i.e. analysis of income and expenses
  • Risk Management i.e. assessing your risk relating to your life, health and other tangible assets .
  • Goal Planning through identification and achievement of your financial goals.
  • Investment Management by choosing appropriate asset allocation.
  • Retirement Planning i.e how much you need in your post retirement years.
  • Tax Planning
  • Estate planning through the preparation of will.

The above approach towards your financial goals sets the Planner apart from other Financial Advisors, who may have been trained to focus on a particular area of your financial life.

Some Common Goals Of Every Family

  • Self Education
  • Career Stability
  • Self Marriage
  • Purchase of Car
  • Home
  • Child’s Education
  • Child’s Marriage
  • Vacation
  • Retirement
  • Business
  • Charity
  • Creation of legacy 

Life Planning is a logical process for optimum utilization of your all the resources big or small, present or future for the goals of family, with an eye on the regulations and market conditions. The family is the end beneficiary of Life Planning.

The Financial Planning Process tell us that where you are and where you want to go in future. In this process we collect relevant financial information, do goal mapping, evaluate your current financial position and prepare strategy or plan for achieving your future goals.

The Importance of Financial Planning

Financial Planning is defined as a process under which your goals are defined into money terms  and helps in formulating a plan for the achievement of different financial goals of your life.

It is important for you to get right kind of financial planning service as it can help you in the following areas:

  • Goal Specification – Financial planning helps in defining and quantifying your financial goals in life, the time horizon for achieving the goal and deciding the amount of periodic investments for your goals.
  • Budget Formation – It is considered as the most important part in financial planning because it defines the amount of savings that can be allocated towards your different needs and this in turn helps in the achievement of your goals without compromising on your lifestyle.
  • Asset Allocation – Ensures a balance in your risk and return. The allocation into different investments changes with respect to age, risk taking capacity, income-expense ratio etc.

For instance, a person of age 22 will have higher equity exposure in his portfolio because  he has a big time horizon for investments, less financial dependants so higher risk capacity and more income as compared to expenses.

  • Tax Planning – Another important aspect in financial planning is tax planning, financial planning helps in reduction of your taxes by helping you invest in instruments that have low tax incidence with optimum return.
  • Power of Compounding – Starting financial planning in your early age gives you appropriate time period for each goal by allocating lower amounts for your investments.

Can you do your own Financial Planning...

Of course, you are the best who knows everything about your situation, your likes, dislikes and all the aspects of your life. You can do your planning with the help of some websites, magazines, friends and other free or paid research services. You should plan with us if:

  1. A. If you find yourself not competent enough in every field like Fixed Investments, Equity Investments, Commodity     Investments, Life Insurance, General Insurance, Legal, Taxation, etc.
  2. B. You don’t find the resource to know about all the above-mentioned fields.
  3. C. You need Logical Plan for yourself and your family without biases.
  4. D. You want to focus on your career and you need a planner to take care of your affairs.

Be sure you’re getting Right Financial Planning Advice

The government does not regulate Financial Planners as Financial Planners; instead, it regulates Planners by the services they provide. For example, a Planner who also provides insurance transactions is regulated as an insurance agent. As a result, the term ‘Financial Planner’ may be used inaccurately by some Financial Advisors.

To add to the confusion, many Financial Advisors like accountants and investment Advisors can also offer Financial Planning services. To be sure that you are getting Financial Planning advice, check that the Advisor gets remuneration from planning for your family, even without selling you other products.

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