5 Reasons Why A Financial Plan Is Important

Buying a home. Saving for child’s higher education like MBA, MBBS, Engineering etc.. Designing debt management strategy. Insurance planning. Retirement planning. We all have financial goals, but often have no idea how to make them happen.

Unlike more mature markets such as the United States of America (USA), United Kingdom, Canada and Australia, most Indians tend to invest without a properComprehensive Financial Plan’ in place.

Being a Financial Planner, I come across many people who have invested their money without a proper financial plan.

For most of us, a Financial Plan is really nothing more than a “back of the envelope” calculation of how much money is required at what life stage, coupled with a few stacks of documents and some unstructured excel sheets.

In fact, the majority of us would have never consulted with a CFPCM (CERTIFIED FINANCIAL PLANNERCM) – preferring to rely on the sometimes coloured advice doled out by our relatives or friends – or worse, our Life Insurance agents.

Here are five important reasons why you should consider getting a Financial Plan prepared by a professional without delay

1.Help you define your financial goals.

Most financial planners will begin your plan by asking you what your financial goals are. Financial planners will help you to prioritize your financial goals. For couples, sometimes doing this exercise alone is enough to get the two partners on the same page.

In my opinion “Most people spend more time planning their vacation than planning for retirement corpus building, debt management action plan or for their financial goals.”

2. Help you see whether your goals are realistic, especially for your timeline.

After taking a look at the goals, Financial Planner looks to see how you can get there — how much to save, what types of investments to make.

Then, the planner can do a cost-benefit analysis.

Are your goals realistic?

Are they attainable?

Are they measurable?

Is it a time bound goal? It is essential that goals have a time frame or target date.

Goals should be specific, measurable, attainable, realistic and timely.

Most of us have more goals than financial resources, adding that time is a huge factor.

Remember that many goals, such as saving for retirement, a mortgage or a child’s college education and paying off debt, take years to accomplish.

3. Help you see how you can bring your spending in line with your goals. 

Once you know where you’re headed and how long it will take to get there, then you can look at your cash flow to find out if you’re spending more money than you’re taking in.

In my opinion “If you have negative cash flow, there’s no way you can meet your goals.”

The exercise of analyzing expenses often surprises people. “They say, ‘I had no idea I was spending that much on purchasing new apparels or eating lunch out.”

4. Show you what money mistakes you’re currently making.

Aside from spending too much, financial planner explains that analyzing not just spending but the overall financial picture sometimes exposes mistakes — and easy fixes.

Sometimes people look at their credit card debt and say, “I’m paying 40.80% per annum on interest to a bank. Am I making anywhere near 40.80% on any of my investments?”

5. Allow you to measure your progress on your goals.

Once the plan is in place, you can set up measurable goals, such as regularly contributing a specific amount of money toward either savings or debt over a period of time.

 Without a proper Financial Plan in place, our savings tend to be ad-hoc in nature. Over time, this may lead to an investment portfolio that is fragmented and scattered all over the place, with no clear though given to asset allocation, risk tolerance and other vital elements of investing.

“Our goals can only be reached through a vehicle of a plan, in which we must fervently believe, and upon which we must vigorously act. There is no other route to success.” ~Pablo Picasso 

I’ve actually come across investors with more than thirty different mutual fund folios and life insurance policies! And yet, these clients remain off-track when it comes to meeting their financial goals.

A well-drafted ‘Comprehensive Financial Plan’ (a 60 – 70+ pages written report) automatically forces you to consolidate your investments and structure your future savings towards your goals. This leads to the weeding out of non-performing investments, and a much better alignment of your investments with their respective time horizons.

Creating a financial plan is an important step for most people to achieve their financial and lifestyle goals. Working with a qualified CERTIFIED FINANCIAL PLANNERCM professional will help ensure that you create realistic expectations and benchmarks for measuring your progress.


I am a CERTIFIED FINANCIAL PLANNERCM , CHARTERED WEALTH MANAGER®.  For the moment, I have shared my experience growing up with you because it had a tremendous impact on how I do what I do.

If you have a question about your own financial situation please connect with me.  I’d be delighted to try to be of service.

Don’t miss any future posts, please subscribe via email.

Is a Written Financial Plan Necessary? Read it

Spread the love

Leave A Reply