A financial plan is a comprehensive evaluation of an individuals current pay and future financial state by using current known variables to predict future income, asset values, and withdrawal plans. It is a document that details a persons current financial circumstances and their short- and long-term monetary goals, including strategies to achieve those goals. A financial plan can help establish and plan for fundamental needs, such as managing lifes risks (e.g., those involving health or disability), income and spending, and debt reduction. It can provide financial guidance so that youre prepared to meet your obligations and objectives and help you track your progress throughout the years toward financial well-being.
A financial plan can include a budget that organizes an individuals finances and sometimes includes a series of steps or specific goals for spending and saving in the future. This plan allocates future income to various types of expenses, such as rent or utilities, and also reserves some income for short-term and long-term savings. A financial plan can focus on other specific areas such as risk management, estates, college, or retirement.
Financial planning involves a thorough evaluation of ones money situation (income, spending, debt, and saving) and expectations for the future. It can be created independently or with the help of a certified financial planner. A financial plan identifies, organizes, and prioritizes your financial goals, then outlines the steps you need to take to achieve them. It can also lend some insight as to if youre on track to meet your financial goals or if you need to make adjustments to your spending. Financial planning often delves into multiple areas of finance, including investing, taxes, savings, retirement, your estate, insurance, and more.
