• The Finance Noob

What is A Financial Plan?

What do you do when you want to achieve something? The first thing you would normally do is, you would evaluate your present situation with regards to the goal you want to achieve. Next you would create an outline or of the steps you need to take in order to reach your goals. In other words you would create an executable strategy to achieve that goal. If any of those steps involves learning about something that you are currently not aware of, you would make an effort to learn about it. After that, you would move to start taking the steps that form a part of your strategy. For instance, if you want to go on a trip, you would first decide a destination that suits your budget. Then you would plan the locations you want to visit (in a specific order), and after that you would then book the tickets for the travel as per your itinerary. The last step would involve you actually making the trip.

According to Investopedia – “A Financial Plan is a comprehensive statement of an individual’s long-term objectives for security and well-being and a detailed savings and investment strategy for achieving those objectives.”

Does that sound like too much to process? It doesn’t have to be.

What that statement means in simpler terms is that - a financial plan is a strategy that you make for your financial future, by taking an assessment of your current financial state and a comfortable financial position you would like to be in during retirement or post retirement, which is your primary goal. There are many secondary goals (like parenthood, children’s education, children’s marriage, unexpected sickness etc.) which would also have to be factored in and without which your financial plan would not serve its purpose.

A good financial plan would cover 6 aspects:

1. Budgeting

2. Reduction of expenses

3. Saving / Investing for returns during retirement

4. Planning of expenditures during certain milestones of your life

5. Insuring yourself from risk

6. Reducing / Clearing debt

The next few blog posts will try to address each of these aspects in detail.

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Thanks for reading and hope you have an amazing day!


Investopedia: https://www.investopedia.com/terms/f/financial_plan.asp


Financial planning should be done in consultation with a registered Chartered Accountant (CA) or a Certified Financial Planner (CFP). The views in this blog are the author's personal views alone.

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