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Objectives of Financial Planning

The primary objective of financial planning is helping you navigate you to your desired stable financial future. Whether you have a high income or low income, you can aim to invest and grow your money over time. ...Read More

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Objectives of Financial Planning

Financial Planning Objectives in 2025

Financial Planning Objectives in 2025
December 27, 2024

Table of Content

 

What are the Key objectives of Financial Planning?

Understanding what is financial planning and its objectives is imperative before planning for your future. Financial planning is creating a strategy to fulfil your financial goals with the available disposable income. The objectives of financial planning are :

  • Adequate Funds

One of the primary objectives of financial planning is to manage your expenses and create adequate funds to achieve your financial goals. Financial goals, from buying an electric gadget to buying a dream home, can be achieved with proper financial planning. 

  • Balancing Risks and Rewards

Risk management is an integral part of financial planning objectives. Diversifying the investment portfolio to balance the risks and rewards protects your money from market unpredictability and minimises your losses.

  • Flexibility

Responsibilities change with life stages, and so do the goals. Accordingly, you have to adjust the investment plan. Ensuring that there is room for these changes without impacting the existing goals is one of the objectives of financial planning.

  • Simplicity

Designing a financial plan is one aspect, and being able to follow it is another. Your plan should be easy to follow and implement so that you do not make wrong or impulsive decisions that may mar the purpose of the financial plan. 

  • Liquidity

You put aside funds from your income for financial security in times of need. Liquidity is one of the most important objectives of financial planning. The combination of a short-term and long term investment plan ensures that the funds are accessible for emergencies. 

How does financial planning help in achieving long-term financial goals?

After clearing your doubts about what are objectives of financial planning, you also need to know how financial planning helps achieve long-term goals. A financial plan helps in specifying and prioritising goals. It then guides you to work systematically to work towards achieving them. The systematic approach involves:

  • Listing your financial goals and giving a time frame for each of them.

  • Tracking your expenses and cutting down unnecessary ones to enhance the resources for investment.

  • Assessing your risk tolerance and creating a strategy to safeguard your income and assets.

  • Debt management to identify and clear debts and make more room for investments.

  • Creating an emergency fund for unforeseen expenses.

  • Investing to grow money to cover all long-term and short-term goals by creating a long-term and short term investment plan. The long-term investment comprises life insurance plans to safeguard your family against eventualities. Besides, there is NPS, EPF, PPF, etc., for retirement planning or education planning. The investment in these schemes grows over time and helps you achieve your goals.

  • The final step is reviewing and readjusting the investment plan to align with changing goals, your income, and the market scenario.

What are some common challenges people face in financial planning?

Having an idea of the challenges you might have to face in financial planning is as important as understanding what are the objectives of financial planning. Some of the common challenges are mentioned below:

  • Inadequate Knowledge

Lack of knowledge about savings and investments is the biggest hurdle for financial planning. You will not understand where to start unless you gain more information about financial topics. 

  • Unexpected Expenses

Unexpected expenses can disrupt the most efficient financial plan if you are not prepared for them. Building an emergency fund will help overcome this challenge.

  • Debts

Debt management is crucial in financial planning. Debts, however small or big they are, can make it difficult to save and invest. Clearing high-interest debts like credit card dues and personal loans is the only way out.

  • Discipline

Not being disciplined in managing your finances can fail your financial planning. Refraining from impulsive purchases and sticking to the budget drawn are the ways to overcome this challenge.

Key Factors to Consider in Financial Planning

For a better understanding of what are the objectives of financial plan, you should be aware of the key factors to consider in financial planning. They are:

  • Setting Financial Goals

You should set financial goals and work towards growing your money to achieve them. The list should include both short-term goals with a time horizon of 1 to 4 years and long-term goals with a timeline over 5 years. Planning a vacation, upgrading an electronic gadget, minor repairs to your car, etc, are short-term goals. Buying a dream home, retirement planning, education planning, etc., are long-term goals.

  • Budgeting

Budgeting helps manage your finances so that you can comfortably spend for your needs and have enough resources to save and invest. It helps you track your expenses and eliminate the unnecessary ones to optimise your resources. 

  • Begin Saving Early

With fewer responsibilities and limited expenses, you can save more if you start saving early. Additionally, with time to your advantage, you can stay invested longer and derive higher returns. 

  • Managing Debt Effectively

Loans can be lifesavers during emergencies, but they reduce your financial resources. Repaying these debts incurs additional cash outflow. Focus on clearing these debts early to save on the interest outgo and enhance your financial resources. 

  • Emergency Funds

Unforeseen expenses are one of the most common challenges in financial planning. Creating emergency funds ensures that funds are available whenever you need them, and your budget remains intact.

  • Getting the Right Insurance Coverage

Insurance coverage provides financial security to your loved ones in case of an eventuality. Riders in some life insurance enhance the coverage. For instance, critical illness insurance provides a lump sum for treatment if you are diagnosed with critical illnesses like heart disease, cancer, kidney failure, etc.

  • Creating an Estate Plan

Estate planning, i.e., writing a will is important to safeguard your assets and ensure that it is passed on to your loved ones without complications when you are no longer with them. 

  • Tax Planning Strategies

Adopting tax planning strategies in financial planning reduces your overall liability. Funds allocated to tax-efficient plans like PPF, EPF, NPS, etc., and premiums paid towards insurance reduce the tax liability.

Summary 

Financial planning can be overwhelming and daunting for most of us till we understand the objectives of financial planning. Following the objectives with diligence and consistency can be rewarding. However, if you are a novice, you can seek the advice of financial planners who guide you through goal-setting and investment strategy to achieve them, keeping in mind your income and risk tolerance. If you have understood what is financial planning and its objectives, it is never too late to start. 

FAQs on Objectives of Financial Planning

Q. What are the main objectives of financial planning?

The main objectives of financial planning are goal-setting, controlling finances, risk management, smart investing, and monitoring.

Q. What are the 7 steps of financial planning?

The 7 steps of financial planning are 1. Setting financial goals, 2. Gathering financial information, 3. Analysing the current monetary situation, 4. Creating a budget, 5. Building emergency funds, 6. Investing for the future and 7. Reviewing and reorganising. 

Q. What are the types of financial planning?

Retirement planning, investment planning, tax planning, estate planning, insurance planning, and contingency planning are the different types of financial planning.

Q. Why is simplicity important in financial planning?

Simplicity is important in financial planning because it is easy to understand and implement. It reduces the scope for mistakes that affect your financial goals.

Q. How can professional financial advisors assist in achieving financial planning objectives?

A financial advisor will give a customised financial plan to align with your budget and goals. They put together your finances and will help you understand if your objectives are realistic. They give lucrative investment ideas to suit your short-term and long-term goals.

 

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Francis Rodrigues Francis Rodrigues

Francis Rodrigues has a decade long experience in the insurance sector, and as SVP, E-Commerce and Digital Marketing, HDFC Life, manages the online sales channel, as well as digital and performance marketing. He has had hands-on experience in setting up sales channels and functional teams from scratch over a career spanning 2 decades.

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Vishal Subharwal Vishal Subharwal

Vishal Subharwal heads the Strategy, Marketing, E-Commerce, Digital Business & Sustainability initiatives at HDFC Life. He is responsible for crafting and ensuring successful implementation of the overall organisation strategy.

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