Question

Identify and describe the major steps involved in financial planning.

Answer 1

Financial planning process is 6 step process
1) Determining current Financial position : The base of financial planning is determining what one has or what one owes. Whether one has savings or whether on has taken loan and is in debt. Whether on has fix income i.e doing job or one is in business. Thus very first step of Financial planning is to determine Current Financial Position
2) Developing Financial Goal : Next step is to set goals which one wants to achive. If one wants to have $1 mln in next 5 year than one has to determine what amount he has to invest or save evey month/year. Thus setting target is second step of financial planning
3)Identifying alternative courses of action : A well financial plan always involes altenatives. For example is goal is not being achieved by FD rates than it's alternative is equity. Thus identify all possible alternatives
4)Evaluating alternatives: Sometime it happens tha all alternatives do not work. Equity market may be in depression, thus evaluate the alternative
5)Implementing a financial action plan : After determining all factors, implement the plan
6) Reevaluating and revising the plan : After certain period of time always evaluate whether the implemented paln is on track or not. if not than use alternatives