Get Your Personalized Financial Plan

Learn how to make a financial plan

Anmol Gupta

Looks like something complex? It's not so, it's only some common sense. It's the art of managing your money in order to fulfill your goals in life. Quite convenient to put it in a single line but seldom the ideal process is followed. By the way, it’s not just saving taxes :) Here are the steps involved in the process of personal financial planning:

Step 1) Set goals

Why do we need money? Well, we need money for various purposes in life, such as incurring regular expenses, sending children to school, purchasing a vehicle, purchasing a house etc. So, there are some very certain events in our lives for which we need to have a chunk of money in our hands when the time comes. These events are called as “Financial Goals”. These are the events for which we can plan well in advance. Hence, the first step in the process of financial planning is to list down different goals of your life and the money which you will need to fulfill those goals. Typically, goals in life of a common man will include retirement expenses, child education, vehicle, house etc.

Step 2) Assess financial position

After setting up your goals, you need to assess your financial position. It includes calculations regarding how much you need to save today in order to meet various goals in your life and then analyzing whether they are feasible or not. It involves assessing your risk taking capacity to decide the ways in which you may save money for your goals. For example, if you have already taken too much loan, then it will not be a smart move to take another loan to fulfill some goal. On the other hand, if you don’t have any obligations, then you may go for some risky options to invest your money.

Step 3) Make a plan

Based on your goals and financial position, you need to make a plan. This plan will detail out each and everything about your strategy to fulfill the goals. It will list down different schemes in which you will invest to meet your different goals. It will include the amount which you need to invest at different times in different schemes to realize different goals. Suppose you set your goals as retirement and child education, then your plan may include investing in a mutual fund through systematic investment plan for retirement and investing some amount regularly in bank deposits for child education. The schemes you chose for different goals will depend on your specific goals and your financial position. There is no one fit for all. A scheme good for your friend might not be suitable for you. Hence, it's very important to follow first the two steps.

Step 4) Execute the plan

Now comes executing the plan. It includes preparing the documents, opening up accounts and signing up for different schemes as planned and start saving the money. This is the step from which most of us start our financial planning. Simply, Execute! Investing in schemes or purchasing insurance is not financial planning in itself, it's a step in financial planning. So, next time you invest your money in presence of financial planning, be sure to follow steps 1 to 3 first :)

Step 5) Monitor and re-balance

Well, no plan is full proof, right! Things may change, your investment may not perform as expected, your goals may change with time. It’s important here to adjust your plan accordingly. You might need to switch your investments if need be. So, this step is a continuous process which is quite crucial in financial planning.

Ending note

It can be deduced that personal financial planning is a well defined process in itself. It’s not simply seeking an investment option which gives you the highest return, neither it’s only saving your taxes somehow. It’s more than that, and it starts with setting up the goals! So, set your goal and stay tuned with us. We will be coming up with frequent posts related to personal finance. You may also ask us specific questions or any financial term which you would like us to throw light on. We will be happy to address that :) See you soon.

Get Your Personalized Financial Plan
About the Author
Anmol Gupta
Anmol is CEO at 7Prosper. He is SEBI Registered Investment Adviser, with expertise in Finance and Technology domains. Anmol is committed to help people achieve their financial freedom.

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