Skip to content
Home » 6 Types Of Financial Planning You Should Be Doing

6 Types Of Financial Planning You Should Be Doing

“If you take control of your finances today, then you will not be a victim of them tomorrow.” ~ Emily G. Stroud.

This quote underscores the role of financial planning in navigating our lives. Financial planning is a proactive approach to achieving financial security and your financial goals during economic fluctuations. Financial planning is of utmost importance in today’s evolving and dynamic environment.

Types of Financial Planning

This blog aims to shed light on the meaning, importance, and types of financial planning. But before that, it is crucial to understand the meaning of financial planning.

What is financial planning?

Financial planning is a vital aspect of managing your money and achieving your future goals. It involves creating a roadmap for your finances, taking into account your income, expenses, debts, and investments. 

By carefully assessing your current financial situation and understanding your short and long-term objectives, you can develop a comprehensive plan to secure your financial future. 

This may include setting a budget, establishing an emergency fund, managing debt, saving for retirement, and building wealth through strategic investments. With proper financial planning, you can gain control over your finances and make informed decisions to achieve your financial aspirations.

What are the benefits of financial planning?

After understanding what is financial planning you might ask what is the importance of financial planning and if it is even that important well the answer is yes, it is and here is the reason why.

Resource Allocation: Financial planning helps enterprises allocate resources effectively, ensuring optimal utilization of funds and maximizing returns.

Informed Decision-Making: By analyzing financial data and forecasts, organizations can make informed decisions. You can minimize risks and capitalize on possible opportunities.

Cash Flow Management: Effective financial planning enables better cash flow management, ensuring sufficient liquidity for day-to-day operations and reducing the risk of financial instability.

Goal Alignment: Financial planning provides a framework for setting and aligning organizational goals, allowing for a more focused approach toward achieving long-term success.

Profitability Enhancement: Through strategic financial planning, enterprises can identify ways to enhance profitability, control costs, and increase revenue.

Risk Mitigation: Planning your financials allows organizations to assess and mitigate financial risks, safeguarding the business from potential setbacks.

Adaptability to Change: By incorporating some flexibility in financial planning, you can respond to changing market conditions and adjust strategies accordingly, ensuring resilience and sustainability.

Types of Financial Planning

Now that you know how important it is to plan your finances let’s discuss the types of financial planning that you can choose.

Cash Flow Planning

Cash flow planning manages what comes in and goes out from your accounts. It is a regular process, usually done monthly or annually. You can make informed financial decisions by keeping track of your cash flows. It helps you avoid unnecessary expenses and work towards your goals with greater control.

Here is a quick breakdown of the elements of cash flow planning:

Inflows: Identify all sources of income such as salary or business/profession income, rental income, income from investments, etc.

Outflows: Recognise all your fixed and variable expenses like groceries, rent, utility bills, subscriptions, shopping, etc.

Emergency Fund: A percentage of your income should be contributed to this fund. It acts as a cushion for any unforeseen events.

Surplus Or Deficit: Calculate the difference between total inflows and outflows. A surplus is an extra cash that can be saved or invested wisely. A deficit calls for attention to spending and creating more income sources.

Investment Planning

This involves strategically analysing and allocating your surplus money to diversified investment avenues. The objective is to maximise your income levels and mitigate risks. It starts with defining your goals, risk tolerance, and time horizon.

Different types of investors based on their investment style are categorised as follows:

Conservative Investors: They prefer low-risk and stable investments and focus on preserving capital. Examples: Blue chip stocks, FDs, bonds, etc.

Moderate Investors: They like a balance between risk and reward and include a mix of options promoting diversification. Examples: Corporate bonds, SDIs, stocks, REITs, etc.

Aggressive Investors: They are willing to take high risks for high returns and hold investments for a long period. Examples: stocks, startup equity, high-yield bonds, etc.

Retirement Planning:

Most people carry a myth that Retirement Planning is done if one has taken a Pension Plan. Retirement Planning is a very vast subject and one has to evaluate factors like expected age, current lifestyle standard, Inflation, etc. It is the biggest component of Financial Planning as Your working period (Accumulation Phase) and retirement period (Distribution Phase) are almost equal in the current context.

Insurance Planning

It is more or less a safety net for your assets, health and life, protecting you from unexpected problems. This includes insurance for health, life, accidents, vehicles, property, etc. The aim is to create a well-planned strategy that safeguards you and your assets from unnecessary spending.

Tips For Insurance Planning

Carefully analyse your life situation to determine the types and amounts of insurance coverage you need.

Understand the coverage, terms, and premiums associated with different policies.

Periodically review your insurance plans to ensure they align with your current situation.

Evaluate and compare several insurance providers to get the best deal.

Ensure you account for all the insurance-related expenses in your budget.

Tax Planning:

A fine is a tax for doing something wrong & a tax is a fine for doing something right. 

Tax planning is an integral part of financial planning and ignoring this can have a huge negative impact on your returns. With a Direct tax code in the picture, investors would need to plan not only at the time of investing but also at the time of maturity as well.

Estate Planning

Estate planning is planning to manage and distribute your assets in your absence. It incorporates legal papers like wills, trusts, and power of attorney for specific assets to avoid potential conflicts among heirs.

Tips For Estate Planning

Keep beneficiary designations up to date for life insurance, etc.

Ensure all your bank accounts, demat accounts, LICs, and other investments have nominee details.

Designate a trustworthy executor to manage the estate.

Document everything regarding wills, legal papers, etc.

Consider establishing trusts.

FAQ: Types Of Financial Planning

When should I start financial planning for my business?

It is ideal to start financial planning for your business as early as possible. Whether you are launching a startup or already established, the sooner you begin, the better. Financial planning helps set clear goals, allocate resources effectively, and navigate potential challenges. Starting early can establish a solid financial foundation, make informed decisions, and position your business for long-term success. 

What is the first step in financial planning effectively?

The first step in effective financial planning is creating a detailed budget and financial forecast to understand your current financial situation and track your income, expenses, and savings.

What are the 5 steps in the financial planning process?

– Goal Setting: Define your financial objectives, like saving for a home or retirement.

– Data Gathering: Collect information about your current financial situation.

– Analysis: Assess your data to understand your strengths and weaknesses.

– Strategy Development: Create a personalized plan to achieve your goals.

– Implementation and Monitoring: Put your plan into action and regularly review your progress.


Financial planning is a crucial aspect of managing your money and building a secure future. By understanding what financial planning is and the different types available, you can take control of your finances and make informed decisions. 

Whether you’re looking to create a budget, save for retirement, or invest in the stock market, there is a financial planning approach that suits your needs. From basic strategies to complex wealth management techniques, the key is to find the right type of financial planning that aligns with your goals and aspirations. 

So, don’t hesitate to explore the various options and start planning for your financial success today.
Read More – SustVest