DIFFERENCE BETWEEN FINANCIAL PLANNING AND INVESTMENT PLANNING

Most often people confuse financial planning with investment planning. With no second thoughts, investment planning does play a crucial role in a successful financial plan; however, it’s not the plan itself. It’s two distinct parts of an integrated financial process. 

“An investment in knowledge pays the best interest”, says Benjamin Franklin

When it comes to investment planning or financial well-being, nothing pays off more than knowledge about the market. And hence, to improve your financial well being in a true sense, it’s utmost important that you understand the difference between the two distinct parts of an integrated whole.

What Is Financial Planning?

A financial plan is nothing but a comprehensive evaluation of your current and future financial circumstances. Using your current financial stand, your risk appetite, your future financial goals, investing capacity, and your current cost of lifestyle, a financial planner can predict your future cash flows, asset values, and withdrawal plans. Financial Planning as a whole incorporates savings, budgeting, emergency funds, insurance planning, investment planning, tax planning, estate planning, and retirement planning.

Financial Planning is bringing the future into the present.

To summarize, financial planning involves evaluating every aspect of your financial life to create a comprehensive financial strategy (road-map) that will help you accomplish your financial goals – be it short-term or long-term financial goals.

An intelligent financial plan changes as your life evolves. 

Here’s an Eight Step Guide for financial planning –

Step#1

Make a budget. This will help you to figure out where your money is going now.

Step#2

Set your Financial Goals. This will help you understand the purpose of investing. Financial Goal can be anything – buying a new house, world-class education for your child, retirement planning etc.

Step#3

Stay prepared for the unexpected events of life with Insurance.

Step#4

Focus more on savings than spending.

Step#5

Start investing.

Step#6

Create a diversified and goal-based investment portfolio.

Step#7

Keep a track of your investment plan. Check frequently, whether your investment portfolio is strong enough to help you meet your financial goals.

Step#8

A constant study and research about the market, companies you have invested in, their philosophies and growth strategy will help you determine when is it the right time to exit. Hence, last but not the least, plan your exit strategy.

What Is Investment Planning? 

Investment planning is an aspect of financial planning. Investment planning consists of factors like understanding your risk tolerance, diversification of your portfolio, understanding your current financial circumstances, asset allocation, determining your financial goals, budgeting, etc. determining all these aspects you can create the investment plan that will help you accomplish your financial goals.

However, simply creating an investment plan is not enough, you need to stick to it. Keep your calm in the lows. Have patience in order to maximize your returns.

Deepak Dhabalia
   Wealth Coach