by Sanjeev Kumar Gopalakrishnan, Financial Planning

What is Financial Planning?

“The goal is not having more money. The goal is living life on your terms”. – Will Rogers

Every one of us has different short or long term goals in our life. They can be ‘building your dream house’, ‘funding your child’s higher studies’, ‘going for that overseas trip you’ve always been dreaming of’ or ‘saving for your retirement’. But when it comes to realizing these goals, most of us face roadblocks in finding the capital required. It’s not that we earn too less. The problem lies in not properly utilizing the money we earn. Instead of allocating our financial resources to meet our goals, we often find ourselves spending money for impulsive purchases.  

Financial Planning is organizing our money and investing it in the right places to ensure that we have the right amount of money at the right time. It is the process of meeting our life goals through making sensible money decisions. The process involves gathering relevant financial data, setting life goals, analyzing your current financial status and coming up with a plan for how you can meet your financial goals.

So how do you differentiate ordinary financial advice from qualified financial plans? Certified Financial Planners like us follow certain standards, which may help you in understanding what to expect from the Financial Planning. 

Following is a six-step process as prescribed by the FPSB (Financial Planning Standard Board), India.

1. Establishing the client-Planner relationship:

 The Financial Planner should clearly explain or document he services to be provided to you and define both his and your responsibilities.

2. Gathering client’s financial data:

The Financial Planner should ask for information about your financial situation. You and the Planner should mutually define your personal and financial goals, understand your time frame for results and discuss, if relevant, how you feel about risk. The Financial Planner should gather all the necessary documents before giving you the advice you need.

3. Analyzing and evaluating the client’s financial status: 

This includes analyzing your assets, liabilities and cash flow, current insurance coverage, investments or tax strategies.

4. Developing and presenting Financial Plan: 

The Financial Planner should offer Financial Planning recommendations that address your goals, based on the information provided by you. The Planner should go over the recommendations with you to help you understand them so that you make informed decisions. The Planner should also listen to your concerns and revise the recommendations as appropriate.

5. Implementing the recommendations in the Financial Plan: 

You and the Planner should agree on how the recommendations will be carried out. The Planner may carry out the recommendations or serve as your ‘coach’, coordinating the whole process with you and other professionals such as solicitors or stockbrokers.

6. Monitoring the recommendations in the Financial Plan: 

You and the Planner should agree on who will monitor your progress towards your goals. If the Planner is in charge of the process, she should report to you periodically and adjust the recommendations, if needed, as your life changes.

Making a financial plan is the best gift that you can give to your future self. Organize your financials, make the right money decisions and have a solid plan in place. Your future self will thank you for it.

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 About The Author

Sanjeev Kumar G, an IBS Chennai Alumni, is a Certified Financial Planner (CFP) from India, since 2005. He has 22 years of experience and is an expert in various personal finance areas like portfolio construction, investment research, life insurance and financial planning.


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