Financial Planning: Objectives and Importance

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Financial planning can help you achieve your financial goals and secure your future. Irrespective of their age, income level and financial goals, everyone stands to gain from individual financial planning. It will prevent you from investing your money on impulse into investment avenues that may fail to bring desirable returns. Moreover, once you create your financial plan, all you need to do is to stay disciplined and patient to potentially build a stable and healthy financial future.

  • Table of contents
  1. Objectives of financial planning
  2. Types of Financial Planning
  3. Advantages of financial planning
  4. FAQ

Objectives of Financial Planning

Here are the main objectives of individual financial planning:

Setting Clear Goals

The first objective of financial planning is clearly defining financial goals. Your financial plan should include your short-term and long-term financial goals ranging from buying the latest smartphone to saving for retirement. Consider your income, expenses, hopes, and aspirations to set your goals. If you want, you can seek assistance from a financial goal planner to manage your current money needs and create a suitable investment plan.

Establishing a Financial Roadmap

Individual financial planning helps you create a comprehensive roadmap that outlines the steps you need to undertake to achieve your financial goals. It includes everything from budgeting and saving to investing and debt management. Subsequently, you can base all your financial decisions on your financial plan. The good thing about financial plans is that they are dynamic, and you can change them with your changing needs.

Managing Income and Expenses

Effective financial planning entails the management of income and expenses so that there is a surplus to invest towards your goals. It includes tracking your spending, creating a budget, and identifying unnecessary expenditures. You can keep tweaking your budget until you are happy with how much you are regularly saving and investing from your total income.

Investments and Tax Planning

Two of the most vital aspects of financial planning are investments and tax planning. You must create an investment portfolio that matches your risk tolerance, investment horizon, and financial goals while minimizing your tax liabilities. A financial goals planner can help you devise strategies to optimize your investments. With their help, you will also be able to understand the tax implications of your investments.

Managing Risk

Another crucial objective of financial planning is risk management. Medical emergencies, accidents, job loss, and death can disrupt your financial well-being. A sound financial plan has a place for an emergency fund, insurance coverage, estate planning, and other methods of risk management to protect the financial future of your family, even when you are not around.

Regular Monitoring

Last but certainly not least, financial planning helps you regularly monitor your progress towards your financial goals. You can adjust your strategy whenever your life circumstances, financial markets, or personal financial goals change.

Types of Financial Planning

Financial planning is a vast area that could cover several goals and requirements. Here are some common focus areas:


This involves planning your expenses around your income and cash flows. It also includes identifying ways to reduce expenses to increase your scope to save or invest money.

Rainy Day Funds

This involves identifying avenues to set aside extra money to use for emergencies or unforeseen expenses. These could include bank deposits, bank accounts and certain types of mutual funds.

Wealth Building

This focuses on identifying ways to potentially grow your wealth through investments. It includes selecting appropriate investment vehicles (stocks, bonds, mutual funds, etc.) and then determining how to allocate your finances among them.

Retirement Planning

This involves saving money with the aim of building enough income to sustain you after retirement. It involves setting retirement goals, estimating retirement expenses, calculating required savings, and selecting avenues for saving or investing.

Tax Planning

This involves identifying ways to minimise your tax liability. This could include investing in avenues that offer tax deductions such as public provident funds (PFF) and Equity Linked Savings Schemes (ELSS).

Insurance Planning

This ensures you and your family are protected against financial loss due to unforeseen events. It includes evaluating and selecting appropriate insurance policies (life, health, property etc).

Education Planning

This involves saving and investing for future education expenses, such as college tuition for children.

Read Also: Understanding the Importance of Financial Goals Planners

Advantages of Financial Planning

Here are 4 reasons why every individual needs financial planning:

Understand Financial Circumstances

When you sit down to write a financial plan, all arbitrary numbers and figures become crystal clear. You get a clear idea of your income, savings, and current financial standing. This can help you identify the things you are doing that are harming or boosting your financial health.

Focus on Priorities

Individual financial planning enables you to focus on your priorities instead of going with the flow and investing based on impulse. You start focusing on important financial goals like creating an emergency fund and reducing debt.

Create Actionable Steps

financial plan contains small, actionable steps to help you achieve mammoth financial goals like building a retirement corpus of Rs. 1 crore in 8 years. It makes a financial goal less intimidating to begin with and gives you manageable tasks that you can complete to achieve it.

Reduce Stress

Most people worry too much about their future because they have no idea how to build a strong financial foundation. They jump from one investment to another or invest in multiple assets haphazardly with no clear picture of where they are financially and where they want to go. Financial planning helps you see everything clearly and reduces stress.

Read Also: Benefits of Infrastructure Schemes in Financial Planning

In conclusion, financial planning can be an overwhelming and rewarding task for everyone irrespective of their age, income, and expenses. Individuals can get the assistance of a financial goals planner to understand the current state of their finances, clearly define and set financial goals, and the steps necessary to achieve these goals. It is never too late or too early to create a financial plan. The key is to get started as soon as you can.


What are the primary objectives of financial planning?
Financial planning aims to achieve goals like wealth creation, risk management, tax optimization, retirement planning, and ensuring financial well-being for individuals and their families.

Why is financial planning essential for every individual?
Financial planning helps individuals manage their finances, prepare for unforeseen events, get closer to their dreams, and work for their financial future, providing peace of mind and stability.

When should I start financial planning, and can I do it on my own?
It's advisable to start financial planning as early as possible. While you can create a basic plan on your own, consulting a financial professional can provide tailored advice for your specific needs.

Why is financial planning important?
Financial planning is the first step in working towards a secure future. It helps set clear and realistic goals and identify ways to manage your expenses and investments so that you can potentially achieve these. Efficient planning can help you potentially grow your wealth by helping you identify the right investment avenues. Proper budgeting can help ensure that you have enough money to meet your daily needs as well as unforeseen expenses. This can reduce financial stress and foster well-being.

Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
This document should not be treated as endorsement of the views/opinions or as investment advice. This document should not be construed as a research report or a recommendation to buy or sell any security. This document is for information purpose only and should not be construed as a promise on minimum returns or safeguard of capital. This document alone is not sufficient and should not be used for the development or implementation of an investment strategy. The recipient should note and understand that the information provided above may not contain all the material aspects relevant for making an investment decision. Investors are advised to consult their own investment advisor before making any investment decision in light of their risk appetite, investment goals, and horizon. This information is subject to change without any prior notice.