Financial planning ensures that a household or individual has adequate funds not just for regular needs like bills and EMIs, but also for long-term goals like retirement, education, or medical emergencies. This involves saving a portion of current income and investing it smartly for future use.
Component | Purpose |
---|---|
Income | Fuel for current expenses and future savings |
Expenses | Day-to-day commitments + one-off needs |
Assets | What you own — used to grow wealth |
Liabilities | What you owe — managed to reduce financial strain |
Financial planning is not just about buying mutual funds or insurance — it’s about aligning income, expenses, liabilities, and investments to meet goals. It fills the gap between what clients need and what financial products offer by customizing strategies through professional advice.
Aspect | Financial Planning | Typical Advisory |
---|---|---|
Approach | Holistic, process-driven | Product-specific or goal-specific |
Focus | Entire financial life (retirement, estate, insurance, etc.) | Stocks, funds, tax saving instruments |
Goal Setting | Core of the process | Not always considered |
Monitoring | Ongoing and proactive | Client must follow up |
Personalization | Custom strategy for each client | One-size-fits-all or generic recommendations |
Continuity | Continuous process | One-time or episodic |
An individual’s income is used to meet current needs and save for the future. These savings are invested in assets, which can grow or earn income. However, when loans or borrowings are taken, they create liabilities that reduce future income due to repayments. The net difference between all assets and liabilities is the individual’s net worth.
Item | Amount (₹) |
---|---|
🏡 House | 18,12,000 |
🚗 Car | 3,25,000 |
📈 Mutual Funds | 8,40,000 |
💰 PPF | 3,20,000 |
📊 Shares | 2,80,000 |
🏦 Cash & Bank | 45,000 |
Total Assets | 36,22,000 |
🏠 Housing Loan | 12,02,000 |
💳 Credit Card Dues | 5,000 |
Total Liabilities | 12,07,000 |
🧾 Net Worth | 24,15,000 |