What are the Types of Financial Planning in 2023?

Financial planning is not just a one-time activity. It is the sum of several different types of plans that are sub-plans of the overall financial plan.

Here we will look at the different types of financial planning and how to combine them to create a comprehensive financial plan. Let’s start by answering the question “What are the types of financial planning?”

Types of financial planning

Let’s break down the types of financial planning into 6 main categories and examine each one in detail.

1. Plan your cash flow

You can think of this type of financial planning as your income statement. The idea is to make sure you have enough money to meet your needs and to use your budget to maximize your savings each month.

2. Planning insurance needs

Insurance planning is the sum of life insurance planning, amount and combination of health insurance, choice of occupational or personal health insurance, choice of individual plans or family plans floats, ensuring that your assets avoid depreciation, insuring your liabilities with accident insurance, etc. .

3. Plan your retirement

One of the most important ways of financial planning is to plan for a safe, secure and happy retirement. After all, if you’ve worked your whole life, you deserve to rest on your laurels. For example, your retirement plan should focus on increasing inflation and increasing living standards.

4. Plan your investments

It starts with asset allocation, selection of suitable investment vehicles, verification of the diversification of the plan, assessment of the risks, benefits and liquidity of the investment plan, etc. Options such as bonds, gold stocks, mutual fund REITs, etc. and help you choose the right combination. This is the executive part of the plan.

5. The truth about tax planning

Among the different types of financial planning, tax planning is very important because it also ensures that your tax investments are in line with your overall plan. The idea is to focus on after-tax returns rather than pre-tax returns. Plan your investments, withdrawals, asset mix and administration in the most tax-efficient way.

6. Prepare an estate plan

Among the different types of financial planning, it is the last type of planning that involves creating real estate investments. You may not only have a portfolio of financial assets but also need real estate. This is generally considered a peripheral thing, but if it is necessary to do it in a structured way, it is the key between the different types of financial planning.

How to make a financial plan?

You create a financial plan for the future. After looking at the different types of financial planning, let’s look at the basic steps involved in creating a financial plan.

1# Set your financial goals. Goals help you determine where you want to go in terms of details, results, and actions. These are the guidelines for your financial plan.

#2 The second step is to create a budget. to look at your streams of income and expenses. See your monthly income and resources, how you can reduce your expenses, how you can reduce your expenses without compromising your lifestyle, excess savings, etc. This is a key document for getting the most out of your savings.

3# Plan your taxes early. For example, capital gains are more tax efficient than dividends. In addition, equity may be taxed more than debt. The long term is always more tax efficient than the short term. It is a question of financial prudence.

#4 Now is the time to build an emergency fund. A rule of thumb is to build an emergency fund that averages 5-6 months of income. Invest in cash and only withdraw in an emergency. This basically ensures that you don’t have to sell the fire.

#5 Be smart about managing your debts. If you’re paying 35% interest on huge credit card bills every year, you can forget about building wealth. Reduce costly debts and consolidate multiple loans.

#6 Take care of your life, the health of the whole family, ensure your ability to avoid breakdowns and finally avoid your liability for bad surprises in the event of an accident. Appropriate insurance is also considered at this stage.

#7 Build your retirement and children’s education corpus. Start early and let the power of the setting work at its best.

#8 Finally, write a will for smooth succession planning. Let your loved ones enjoy the benefits gently and systematically after you.

Basic concepts to understand in financial planning

Some important concepts to understand in financial planning are goals, financial objectives, investments, asset class, asset allocation, valuation, restructuring, objectives long-term, short-term goals, risk assessment, etc.

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