Your Financial Plan starts with you

Let me start by asking a fairly basic question – what exactly is a financial plan? Over the years I have heard and read several definitions of it, but none of them have really captured the theme in a complete manner. Most people tend to equate a financial plan with an investment plan, some will throw in insurance for good measure, others may even add estate planning and so on. All of the above are definitely parts of a financial plan but they do not really constitute the whole.

The most important part of your financial plan is you, and we very often do not understand the significance of this. As an unique individual, you will have an idea of how you want to lead your life, what assets are important to you, how are you going to earn and spend and what paths will your other family members follow in their lives. Unless the above is reasonably clear to us, it is very difficult to make a successful financial plan. The objective of a financial plan is to ensure that the map of life that you have defined for yourself and your family has the required financial support. Once you understand this clearly, the rest will follow.

Another element that I have discussed with many others is this – is it possible to have the same kind of plan outline for all people, given that each individual is unique and their circumstances are different? My answer to this is a simple one. We can have a template of a financial plan as the basic building blocks will be common to each one of us. How we construct those building blocks will depend on our life map and the financial support that it will take to make such a map a reality.

For example, your child may fancy becoming a commercial pilot and your friend’s child may want to be an artist. Assuming they are serious about it, both of you will need to enable them financially to fulfill their ambitions. What is needed for it and how you will get there, may well vary widely but the base elements of a defined goal and a plan to financially reach there is common to both of you.

The starting point of all of this is how you want your life to unfold from here on. If you have not given much thought to this earlier, I suggest you do some deep thinking about it over the weekend. look at what you would like to achieve in the next few years – normally a block of 5 years is a good unit to think about. What are the important events that will take place in the lives of you and your family? How do you see your career progress? If you are planning to retire in a few years, what kind of life will it be? If you are planning to start some venture when and how will that come to fruition?

i will be writing about the financial template and how to go about making a holistic financial plan in my next post, but to utilize it effectively in your life you must complete the above exercise first.


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