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Financial Planning Basics: Creating a Financial Plan in Six Simple Steps

It is a fact that most people spend lavishly when they are earning well and don’t think about their financial future. As a result, they end up with a lot of debt when their earnings reduce due to reasons like retirement. A sure shot way of preventing yourself from landing in such a situation is to create a financial plan. For those of you who are unaware, financial planning is a process in which you need to develop a personal roadmap to achieve financial well-being.

6 Steps of Financial Planning

Now that you are aware of the meaning and benefits of financial planning, it’s time to act and follow the 6 steps of financial planning mentioned right here.

Step 1: Determine Your Goals | What is important to you?

The first step you need to take to handle the financial planning yourself is to analyze your current situation and determine your goals. You need to know how much money you have and decide how much money you ought to have by a specific timeframe. The financials goals vary from person to person. In some cases, they can be investing for a better future, and in other, they can be acquiring certain assets like a home, a vehicle, etc. The goals need to be set on the basis of your social and economic condition.

A key parameter that can help in setting financial goals is to distinguish between needs and wants. Having ample money for your kids’ education is a need while having ample money to buy a diamond set you like is a want. The focus should always be on meeting the needs and considering wants only if you are successful in meeting all the needs.


SearchStep 2: Collect Information | Research. Read. Listen. Question. Understand.

Once you have analyzed your financial situation and determined the goals, you need to start honing your financial planning abilities. It can be done by following this simple sequence. i.e., Research. Read. Listen. Question. Understand.

Start by researching about topics you are unaware of online or offline. The topics can vary from understanding about various investment options like mutual funds or researching the process of buying health insurance. As you would collect ample amount of data in the research stage, the next stage is to read or listen to the data you have acquired. In case you cannot understand a subject or a concept, you need to ask questions from the experts to understand it better.

In case you don’t want to hire a personal financial advisor, you can attend free webinars or events organized regularly wherein competent financial experts share financial planning advice for free.


Step 3: Create Your Financial Plan | Make SMART choices!

By this stage, you should have enough knowledge to create a rough financial plan for yourself. You can always refine it later. While creating a financial plan, the most crucial thing you need to remember is to make SMART (Specific, Measurable, Action-oriented, Realistic and Time-based) choices. Let’s understand them better here:

  • Specific: The goals you set need to be about specific actions like how to reduce overspending.
  • Measurable: The goals need to be measurable like saving at least INR 10,000 a month for a house.
  • Achievable: The goals cannot be unachievable like saving INR 50,000 a month if your income is INR 55,000.
  • Relevant: The goals must align with your financial reality. For instance, buying health insurance if you have a family history of illnesses.
  • Time-Based: The goals need to be achieved by a specific date like buying an SUV by July 2019.


LInkStep 4: Link Your Financial Goals with Investments | Long Term. Medium Term. Short Term.

You should set short term, medium term, and long-term goals and plan your investments accordingly. For instance, if you have a short-term goal of buying a car, you can achieve it by just using your savings account at the bank. If you have a medium-term goal of buying property, you can consider mutual funds, and if you have a long-term goal of saving for a child’s marriage, you need to invest in equity-oriented funds via SIPs. You can transfer the funds through STP to liquid funds when it’s time to pay the education expenses.


ImplementStep 5: Put Your Plan to Work | Implement.

There is hardly any point in completing the stages mentioned above if you don’t implement your plans. The keys to implementing all the financial plans are finding your focus, changing your lifestyle and staying disciplined. You can start the implementation process by writing down and filling the blanks of most obvious questions like what’s the simplest financial goal for me right now or what are the top three steps I need to take to achieve this goal.

In case you need help in implementing your financial plans, you should seek the option of automation. Yes, just like you can automate the utility payments, loan repayments and purchases, you can automate your savings, investments as well as your annual filings too.


Step6: Monitor and Review Your Plan | Is everything on track?

Last but not the least, you need to monitor your finances constantly (at least once a week) to ensure that you are moving towards achieving the financial goals you set for yourself. If you have different investments like mutual funds, stocks, etc. then you can review them annually.

This step is essential because it helps you to identify any wrong financial decisions and change them in time to minimize the losses. It is also essential because if everything is on track, it gives you the satisfaction that you are moving in the right direction and you did everything right till now.

The Result


Enjoy Financial Freedom!

If you implement financial planning steps smartly, you will attain enough financial freedom to enjoy your retirement fully, have access to assets you love, have ample money for contingencies, and you will be able to let your kids have a secure financial future.

Consumer VOICE Recommendations for the best Investment Plans

Pension Plans

Pension plans are the most popular choice. You can start with learning how to choose best pension plans.

Pension Plans offered by Nationalized (PSU) and Private Insurance Companies

We compared unit linked pension plans of both Nationalized (PSU) and Private Insurance Companies on the basis of maximum and minimum vesting age, maximum and minimum policy term, minimum premium, maximum and minimum entry age, charges for premium allocation etc. to help you find the best pension plans available.

Brands Compared include: Aditya Birla Sun Life, Bajaj Allianz Life, Canara HSBC OBC, Edelweiss Tokio, HDFC Life, ICICI Prudential, IDBI Federal, SBI Life, Max Life, and Reliance Life. Read More

Market Linked Investment Plans or Mutual Funds

A mutual fund is an investment where it pools the money of several investors and invests this in stocks, bonds, money market instruments and other types of securities. It’s an ideal investment vehicle for regular investors who do not understand much about investing. Investors can choose a mutual fund scheme based on their financial goal.



Consumer VOICE Banking and Finance experts have compared some Market Linked Plans to recommend the Best Buys:

Health Insurance Plans

Consumer VOICE experts have compared following insurance plans to recommend the Best Buys

Our last bit of advice is that you should regularly read banking and finance blogs to keep up with the happenings of the world of banking and finance and make smart decisions about your investments. It is also advised that you revisit your investments and gain knowledge about all the latest banking and finance products to ensure that your investments flourish with time.

If you have a medical condition, you should also compare relevant health insurance plans to get a financial cushion in cases of emergency.

We have compiled a few Buying Guides to help you choose the best insurance plans:

Divya Patwal


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