Be Finwise

What is Financial Planning?


Financial planning is a process by which you identify your goals and plan your finances to achieve them. It is about deploying your money sensibly with the end goals in mind. It is not a one time affair but an ongoing one where you review and tweak your plan as per the changed circumstances, lifestyle and financial goals.

To illustrate the need for financial planning let us take the case of 50 year old Mr. Ravi who invested money in a much focused manner but without a financial plan. He is a very disciplined investor. He has been setting aside 35% of his income from age 30 towards investments. He has done well professionally and has had an average growth in salary of 10%. He has invested in Bank FDS, insurance policies, gold and the house he currently resides in has been brought from his savings. He chooses to retire at 55 and will live for another 25 years. One would think that given his focus he would have built up substantial wealth, he was headed towards a comfortable & secure retirement. You would be extremely surprised to know that the money invested by him would have just barely beaten inflation assuming he managed post tax returns of 8%. His corpus would not be enough for his retirement leave alone other goals.

Why and when does one need an Financial Plan?


I have often come across people who ask me these questions

1) Are you serious? Why would we need a financial plan? Is it a new fad?

You do have a plan for your next holiday or how to celebrate your kids next birthday don’t you? If you could spend time to try to organize something just so that it is well organized and you derive maximum from the event, why not give time to put your personal finances into order? After all this is one thing which could pay you rich dividends by way of realization of dreams and the ability to live a fulfilling life.

2) My parents never had a financial plan they seem to have done well?

True. Our parents are somebody who we look up to and it should be that way. But many things have changed over the course of the years. Let’s consider the common situations that parents of our generation went through.

For many parents from the previous generation, we their children are their retirement plan! They had strong belief and confidence that they will be taken care of by their children. With changing family dynamics, this may not be true for us. Even if it were, I am not sure if we would be comfortable with the situation.

Also, many in our parents generation did not really have either that much disposable income to invest or many options where they could invest unlike us, with traditional wisdom being to invest in debt and in some cases, gold. Hence, even if some of them had built corpuses, they would be inadequate to take care of their complete post retirement needs. Most of them would have under estimated the erosive effect of inflation and therefore not foreseen the negligible real return on their corpus. Comparing our circumstances therefore with theirs would really not be an apple to apple comparison.

3) Are you telling me I am smart enough to make money but not smart enough to handle it?

No. If you can spare the time to understand the various options available to you and the best fit route to achieve your dreams you could make a financial plan yourself. Planning involves understanding, strategizing, implementing, reviewing and course correcting which therefore require that you invest significant time on an ongoing basis towards it. Time is a commodity which most people with their hectic lifestyles always run short of. Some wise man said (possibly someone who realized this a bit late) – “Financial Planning is one of the most important tasks which we end up never giving time for”.

Having said that, even if you make a financial plan yourself, you would definitely benefit from the objective perspective of an expert to either tweak or validate the plan to ensure that your goals are achieved.

Can I do my Financial Plan myself?

Making a financial plan requires you to devote time in understanding various products available and their suitability keeping your risk appetite and time frame in mind. While hiring a financial planner will help you navigate the maze with ease, you can choose to do it yourself. There is a lot of help online which can help you understand the basics as well as advanced features of various products as well as categories. You can check & for insightful articles concerning personal finances and for basics on mutual funds. We also send weekly newsletters covering various aspects of personal finance. Click here to receive them.

It is very important for you to keep in mind that financial planning is a process not an event. Just making a one time plan is not going to take you very far. It is crucial to review your plan at regular intervals. Another absolute must is to ensure that you are committed to implementing your plan.


The process of Financial Planning consists of

1. Identifying your current situation

Taking stock of your current situation is the starting point for a financial plan. It is important to understand your current investments, income and expenses. The quality, accuracy and relevance of the financial plan is hugely dependent on the accuracy of the above data. This is like the foundation of your entire exercise and hence one should spend time to do this as accurately as possible.

2. Developing your financial goals

All of us have aspirations and goals in life. With a super hectic schedule one rarely gets time to sit and think about what ones goals in life are, leave alone figuring out how to reach them. Some goals which are common to most of us are educating our children, having a self reliant and peaceful retired life, moving to a bigger house etc. The process of putting your goals on paper is quite a liberating exercise. Many of you will sleep better at night knowing that you know where you want to be and how to get there.

3. Identifying alternative courses of action

Once you know where you want to be the next step would be choosing your route to the destination. This choice can have far reaching consequences and may eventually decide whether you are able to achieve your goals. It is important to list down various options available to you to reach your destination.

4. Evaluating alternatives

Now that you have various options listed down, you will need to understand the risk and return relationship of various asset classes and your ability take those risks. Post this you need to navigate the huge maze of products available at your disposal and choose the right one.

5. Creating and implementing your financial action plan

Once you make the plan you map your goals to the action plan decided upon and implement it. The essence would be to implement it right away and stay focused and true to the path you have chosen to take.

6. Review and revise the financial plan

At the cost of repeating myself I would like to reiterate Financial Planning is a process not an event. It is extremely important to keep revisiting and reviewing the plan periodically to account for both changing circumstances and changing aspirations.

Is Financial planning only about personal finance?

Undoubtedly most people embark upon the journey of financial planning primarily to streamline personal finances and ensure they meet their life’s goals. What is surprising though is the clarity and peace of mind the process brings to your life. Yes, it is about primarily putting your personal finances in order, but when you have a plan in place, it leads to not only a better tomorrow but also a fulfilling today. I have met customers who hadn’t taken a holiday in years and have been so busy building wealth that they had forgotten to enjoy it. With a plan in place they would be reminded that they aspire to holiday, and could afford to do so.

Financial planning also does not mean scrounging on experiences and little things which give you great pleasure like the weekend family outings, vacations and social expenses that give you immense satisfaction. It is about living your today well and being prepared for any surprises that tomorrow may hold. It about taking control of your life and not letting your money control your life!

What beyond Financial Planning?


Beyond Financial Planning would be Life Planning!

Life planning is a guided process by which an individual takes stock of his or her life, clarifies goals and challenges, and identifies the steps needed to move forward. A life planning professional can help address relevant issues and find resources – people and information – needed for a successful transition. Life planning is often collaborative because life issues cross more than one discipline. As a result, you may need to work with more than one professional, including financial planners, attorneys, coaches, counselors and other professionals. Ideally, the professional you start with will introduce you to others and will coordinate the work they do on your behalf.

2 thoughts on “Be Finwise

  • December 24, 2015 at 3:41 pm

    I would like to re-organize my personal finances. Some bad financial expenses are now eating into my savings and ability to repay current commitments inspite of having a decent take home salary. Need advise to rearrange these bad debts and turnaround into savings and investments.


    My contact # is +91 95940 XXXXX (masked)

  • April 11, 2017 at 10:24 pm

    Financial planning


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