Financial Planning: Worth the effort?

What do you do when you want to take a nice and comfortable vacation? You decide where, when, and for how long you want to go. Then, you make all the necessary arrangements like travelling, accommodation, budgeting, curating the itinerary, and other essential requirements. This hectic but useful process is called planning.


Now, many of you can come up with a vacation plan in minutes, but don’t take out the time to chart out a financial plan for your hard-earned money. We’re here to help you navigate through the process and jolt you to chalk out a financial plan.

What is financial planning?

Financial planning is a process which helps us ascertain our current financial situation and decide the necessary steps to reach our financial goals. It helps in bridging the gap between our current financial state and future expectations.


. Two prerequisites before you set out in your quest to formulate your financial plan are:

  1. Having a financial goal
  2. Ascertaining your current financial position.

Financial planning is a three-step process:


The stepping stones to Financial planning:

Having a crystal-clear goal: Formulating goals is very much like using Google Maps. You enter a destination, see the time it’ll take you to reach there, look at alternate routes and plan your journey accordingly. Similarly, a well-defined financial goal, best suited to your needs, will ensures that you don’t deviate from your path. A goal could be anything ranging from buying a new house to funding your start-up. To make the process even more effective, divide your goals into short-term (buying a car), medium-term (a foreign vacation), or long-term (retirement or children’s education).

Knowing where you stand right now: Like in a game of chess, you have to consider the positions of all your pieces before you make a move. Not doing so can land you in a precarious position. Similarly, if you don’t account for your current financial position and keep making your moves randomly, your bank balance will be sure to checkmate you. Analysing your financial status is a vital aspect of financial planning. For this, you need to determine your net worth which is the difference between your assets and liabilities. You also need to find your current cash flow, i.e. where your money is going and coming from every month. Why is this important, you ask? Knowing the exact amounts of your expenditure, savings, and investments will help you in cutting back your expenses. It will help you identify the spaces where you could improve your financial behaviour.

Benjamin Franklin said, “If you fail to plan, you are planning to fail.” : And rightly so. Have you wondered what would happen 25 years from now when some of us will be nearing our retirement age, some will be busy with our kids frantically searching for the best colleges, and some will be shaking in their boots thinking about how all their money vanished into thin air? Now, wouldn’t it be ideal if there was something you could fall back on? What if we tell you there is something, rather someone, you can rely upon? We are talking about YOU, and your financial plans. A plan, if carefully made and properly executed, can create wealth, secure your retirement, save up for your kids’ education, medical or other exigencies, all at the same time.

The earlier you plan, the more you gain. You can start reaping its benefits even if you have just started the process. It can help you increase savings by tracking and cutting costs and achieve a better standard of living due to little or no sacrifice on account of monthly bills and EMIs. You can bid goodbye to surviving on a bowl of Maggi at the end of the month. No more will your salary get snapped out of your wallet like Thanos snapping away half of the universe.

The Ayes and the Nays:

  • Look at different investment options. Implement the right plan after considering factors like your goals, age, risk appetite, and investment amount. Just saving regularly in bank deposits or mutual funds is not financial planning. It is definitely a formative step towards financial wellness, but allocating savings and investments randomly without considering factors like inflation and personal risk tolerance will not help you achieve your life goals. To know more about inflation read ‘Inflation- The Yamraj of your savings’. 
  • Know your taxes. Be aware of different deductions and exemptions to save your taxes. Eg, tax brackets on different charities, allowable amounts on PPF, etc. Paying taxes is important but you can always try and reduce the burden that falls on your net income.

  • Secure your family with beneficial insurance plans that can provide your family with the safety net that is essential for their well-being.
  • Building a strategic portfolio that is both diverse and rewarding is crucial. Many investors often face the problem of having an improper asset mix. This could be due to largely scattered investments which often become difficult to track. Having a proper financial plan helps in maintaining a portfolio diversification which helps in risk reduction and wealth maximization. If you feel that you require help in this area, you can always reach out to reliable financial planners who can assist you in the process. 
  • Make sure that you monitor and revise your plan at least once a year to accommodate any changes in your personal or socio-economic conditions.
  • Different people have different sets of goals and therefore, different plans to achieve them. A 20-year-old could probably aim for a startup or for higher education, whereas, a 55-year-old might be looking forward to a family vacation or a debt repayment. Similarly, family composition affects the financial goals as well. It also depends upon the duration our goals are set for. The factors influencing the plan change with a change in any of the factors like duration, age, risk tolerance etc.


Financial planning is a continuous process that you need to follow. It may seem tedious initially, but your aspirations for a better and secured life are worth the efforts. And, while walking on the path towards success, if you find mountains en route; well, what are you waiting for? Blast those things down!


Team Investoday