What are the steps involved in financial planning in India?

Stock Market Investment Shot, 20th January 2023

Stock Market Investment Shot, 20th January 2023

Today, many investors are investing in different financial to achieve financial freedom. However, nothing can be achieved in life without planning. For financial freedom, you need to start with financial planning. However, most investors don’t understand the term and consider investing in a stock or buying insurance plans as financial planning. Therefore, as a first step, we must understand the meaning of financial planning and then learn the steps involved in financial planning in India.

What is financial planning?

Financial planning is a process where you put together a plan for your future – how you will manage your finances and prepare for all the potential costs and issues that may arise in your financial journey. You start by evaluating your current financial situation, identify your financial goals and then create a plan to achieve them.

Financial planning is broad and holistic and consists of many services – tax planning, estate planning, retirement planning, insurance planning, etc. You require expertise to take care of all aspects of financial planning. If you believe you don’t have the necessary skills and knowledge, you can get in touch with an investment advisor in India and get your financial planning done.

Steps involved in financial planning

The financial planning process consists of six steps, and they act as a roadmap in the planning process. You must understand the steps and then implement them:

Evaluate your current financial condition: The reason financial planning is personalized is that everyone has a different and unique financial situation. The first step is to know your current financial situation. For example, you must evaluate your net worth, calculate your cash flows, get your debt-to-income ratio, and so on.

Determine your risk profile: Most investors go wrong in financial planning in India because they start the investment process without knowing their risk profile. The second step in the process is to find your risk profile – it will help you decide which asset class to choose for investment. Some investors are comfortable taking high risks, while others opt to play safe.

Set financial goals: Once the first two steps are completed, we move to the most crucial step – setting financial goals. You must set goals that are honest and realistic. Please ensure you break your goals into three broad categories:

Look for financial advisors in India, as they can help you set goals with clarity.

Create an emergency fund: Life is unpredictable, and even if you create the best financial plan, it can be challenged by unplanned events. Therefore, you must plan for an unexpected financial situation – for example, your car breaking or a job loss. Withdrawing your invested funds – unplanned – is not recommended in financial planning. Ensuring you don’t have to do it can be achieved when you create an emergency fund which can be between 6 to 12 months of your monthly expenses. These funds will give you time to stand on your feet in difficult times. Please ensure that you don’t touch these funds for any other purpose. 

Implement your financial plan: The next big step is to implement your financial plan. You already know your goals. You need to unravel which asset classes can be tied to which financial goal. Most people fail on this step as it is an ongoing process and requires discipline. If you want to achieve financial freedom, it won’t come easy.

Review and update: The financial world is continuously changing. For example, someone who would have created a financial plan five years ago, would not have invested in ETFs. Today, ETFs are part of most investors’ portfolios. Secondly, your goals will change with time and responsibilities. For example, today, you may not plan to buy a house, but with time you may feel the need for it. Once you add this to your goals, your planning needs modification. Also, your living standard may change with time. For all these reasons, you must revisit your financial plan and review it periodically.


Financial planning is about looking for elements from your financial life and coming up with a plan to meet your responsibilities and achieve your goals. There is a lot to it, and you can get in touch with the best financial advisors in India to help you create your financial planning and hold your hand in achieving all your financial goals.

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