Financial Planning

Financial Planning is the process of developing a personal roadmap for your financial wellbeing. The inputs to the financial planning process are:

1.your finances, i.e., your income, assets, and liabilities,
2.your goals, i.e., your current and future financial needs and
3.Your appetite for risk.

The output of the financial planning process is a personal financial plan that tells you how to use your money to achieve your goals, keeping in mind inflation, real returns, and taxes.

In short, financial planning is the process of systematically planning your finances towards achieving your short-term and long-term life goals.

Life goals

Most people nurture dreams of owning a bigger house or car, exploring the world, giving their children the best possible education, a blissful retirement, etc. Basically, these dreams are life goals. Consider this example.        

Mr. and Mrs. Bhanot, 35 and 32 respectively, have a three year old daughter. Both work in private sector companies. Mr. Bhanot plans to retire when he’s 50. From their current one bedroom rented suburban Mumbai apartment, the Bhanots hope to move to their own two bedroom apartment costing around Rs 25 lakh within the next five years. They own a small car, for which they have availed of a loan. Mr. Bhanot reckons that he will need Rs 15 lakh for his daughter’s higher education 15 years later. He also wants to build a corpus of Rs 75 lakh for his retirement.

While distinguishing short term goals from long term goals, you must keep in mind that, as a general rule, any life goal that needs to be met within five years can be considered as short term. Beyond that, any other goal can be classified as long term. By this classification, the Bhanots’ goals can be classified as follows:

Short Term Goals

Long Term Goals

2BHK apartment

Daughter’s higher education


Retirement corpus

  • Helps monitor cash flows and reduces unnecessary expenditure.
  • Enables maintenance of an optimum balance between income and expenses.
  • Helps boost savings and create wealth.
  • Helps reduce tax liability.
  • Maximizes returns from investments.
  • Creates wealth and ensures better wealth management to achieve life goals.
  • Financially secures retirement life.
  • Reviews insurance needs and therefore also ensures that dependents are financially secure in the unfortunate event of death or disability.
  • Lastly, it also ensures that a will is made.

Financial planning can help you achieve peace of mind since:

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