This often includes a budget which organizes an individual's 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 planner is sometimes referred to as an investment planner, but in a personal finance a financial planner can focus on other specific areas such as risk management, estates, college or retirement.

In business, a financial plan can refer to the three primary financial statements (balance sheet, income statement and cash flow statement) created within a business plan. Financial forecast or financial plan can also refer to an annual projection of income and expenses for a company, division or department. A financial plan can also be an estimation of cash needs and a decision on how to raise the cash, such as through borrowing or issuing additional shares in a company.

What is a personal financial plan?
DEFINITION of 'Personal Finance' All financial decisions and activities of an individual, this could include budgeting, insurance, savings, investing, debt servicing, mortgages and more. Financial planning generally involves analyzing your current financial position and predicting short-term and long-term needs.

BREAKING DOWN 'Personal Finance'
All individual financial activities fall under the purview of personal finance; personal financial planning generally involves analyzing your current financial position, predicting short-term and long-term needs and executing a plan to fulfil those need within individual financial constraints. Personal finance is a very individual activity that depends largely on one's earnings, living requirements and individual goals and desires.
Among the most important aspects of personal finance are:
• Assessing your current financial position - looking at expected cash flow, current savings, etc.
• Buying insurance to protect yourself from risk and making sure your material standing is secure
• Calculating and filing taxes
• Savings and investment
• Retirement planning
Matters of personal finance include, but are not limited to, the purchasing of financial products for personal reasons, like credit cards, life and home insurance, mortgages and retirement products. Personal banking is also considered a part of personal finance, including checking and savings accounts and new banking products.

What is the purpose of Financial Planning?
The major purpose and reason for financial planning is to line up our financial and lifestyle ducks. Most people have a lot going on financially and with life in general, life insurance, pension plans, education funds, taxes, employee benefits, wills, power of attorney’s, cash flow to mention a few . It’s very important that we have informed reasons to base our financial and lifestyle decisions on. A personal plan becomes like a rudder for your financial ship. Most importantly it gives you control financially which in turn reduces stress and will give you an improved quality of life. Plus it just makes sense; we plan everything else in our life so why wouldn’t we plan for the best use of the money we work hard for and create some financial freedom.

Where do we start?
Before you start a plan you must first identify what your personal objectives, goals and dreams are. This is the first step in personalizing your plan. Then you need to inventory your assets, liability and expenses so we can clearly identify a starting position. All of this information will be recorded on a data form and may take some time to accumulate. Many people find that this process is very valuable and rewarding because it requires: accounting for expenses, evaluating debt, reviewing investments portfolio weightings and getting an up to date wills and power of attorney, all things they have been planning to do but haven’t got around to it because it’s a daunting job.

The second step is to transfer this information to financial planning software program. The amounts of input items are vast. So without a computer program it would be impossible to organize and evaluate all of this information.
The third step is for a financial planner to interpret all of this information. A professional Financial Planner will have a clear understanding of risk management requirements, wealth accumulation products and purpose, taxes, retirement rules and regulation, government benefits, estate planning etc. Without this professional knowledge and understanding it would be impossible to complete a comprehensive personal financial plan.

How do I start implementing my plan?
You will now have all of the information to make informed decisions. Once more you need to clarify your objectives and then take action that will allow you to accomplish each of your identifiable goals. Your financial planner with give you a step by step process based on your priority of importance. Some goals you will change immediately with perhaps a slight adjustment to what you are currently doing. Other goals may need to be re designed to accomplish your intended result. But remember that financial planning is like a rocket ship going to the moon, it is off course 90% of the time and corrections must be made. As long as you clearly know what your objectives and goals are you will always have a clear target to aim for and can make the required adjustments.

What can I expect from this process?
You will have a clear and concise alignment of your assets, liabilities and expenses to your personal objectives, goals and dreams. You will then proceed with confidence knowing exactly what needs to be done to accomplish your objectives. Words that I have heard other people say are: relief knowing it can happen, feelings of confidence, excited about the future, clear direction to mention a few. The whole process takes a non tangible position and makes it tangible by attaching actual numbers and time frames to your plan which will taking the guess work out of future financial decisions.

I have been asked before -when is the best time to start a financial plan? My answer is always the same “the best time was twenty years ago and the second best time is today”. It’s one of those things where the sooner you start the better it is but it’s never too late to start.

Financial planning has value at all stages and ages of life because your priorities will change:
• First stage (Starting out years) –When starting out most of our income goes to providing for the lifestyle expense. At this stage there are normally few assets but there could be liabilities with debt (mortgage etc.) and perhaps a new family members having a life insurance planning is important. If there is no house or family as yet then most of your surplus income will go to saving for a down payment for a house purchase, paying off school debt or planning a family. Little money for retirement savings. This is the best time to purchase life insurance because of the young age and most often there is no health issues so it’s easier to get and the cost are very low.
• Second stage (Growing years) – Goals change as your needs change. Children’s education may be important, starting retirement plans and reducing debt may also be the major priorities.
• Third stage (High income years) – This is the time that you must save most of your retirement assets. It is often your highest earning years and cash flow is commonly more plentiful. Income tax, deferral plans will be your focus.
• Forth stage (retirement) – Your lifestyle expenses are paid for from your retirement assets, pension plans and government benefits and you are enjoying life and managing your health. Managing your taxable income will be key for maximising income efficiency.
• Fifth stage (estate planning) – You have accumulated several assets and you need to plan the distribution of these assets upon your passing. You may want to leave a legacy to your family and contribute to a charity or church of your choice. Taxes will be an issue and proper planning will be necessary for a tax effective distribution of assets. Wills, trusts and power of attorneys need to be up to date.

Why is it important to have a financial plan?
The Importance of Having a Financial Plan. Creating a financial plan helps you see the big picture and set long and short-term life goals, a crucial step in mapping out your financial future. When you have a financial plan, it's easier to make financial decisions and stay on track to meet your goals.

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