What is financial planning?

Financial planning takes a wholesome view of a person's financial health. This will entail looking at the age, dependents, income, expenses, loans being serviced, goals for which the person is saving and whether the individual is adequately insured. It will also look at the broad areas of investing. Given all the above criteria, how much of the individual's money must be invested in equity (shares and equity mutual funds) and debt (fixed return investments and mutual funds that invest in them).

For instance, let's say you plan to get married next year and want to put your financial house in order and approach a financial planner.

We will ask you what your major savings goals are. You list four.

1. Saving for a home
2. Saving for retirement
3. Saving for your child's education
4. Saving for your marriage.

The first thing the financial planner will do is prioritise your goals and, taking your age in to account, give a time frame for each.

So, now, your goals will be put in this order.

1. Saving for your marriage
2. Saving for a home
3. Saving for retirement
4. Saving for your child's education

We will also look at your earnings, whether or not you have to support your parents and if your spouse would be employed. Depending on the time frame for each and how much of a risk you are willing to take, we will suggest a broad investment framework. This will include: How much you should invest in equity and how much in debt. What sort of investment instruments you should opt for. For instance, should you opt for a five year recurring deposit or a Fixed Maturity Plan?

We will also look at estate planning (Who have you nominated for your investments? Have you drawn a will? Should your house be jointly owned?) and insurance (Are you well insured? If not, what kind of plan is best suited? If yes, is it the right plan or should you opt out of it?).

If you are steeped in debt, We will help you prioritise your loans and tell you which ones to pay off first (high interest, no tax benefits) and which can be paid back over time (lower interest, tax benefits).

In a nutshell, a financial advisor will tell you how to get your finances in shape.

Financial Planning says, "An essential part of my task is to put the cash flows in perspective and crystallise them." In other words, we will look at where your money is coming from and where it is going and how you can best utilise it to meet your goals.