How Smart Financial Planning Can Help You Accomplish Your Financial Goals

Dec 12, 2022 / Reading Time: Approx. 12 min

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One of the most critical things you can do for your overall financial success is to establish clarity around your finances. Essentially, financial planning helps you control your finances, like income, expenses and investments, so you can manage your money and achieve your goals.

A financial plan is a roadmap with a step-by-step approach to meeting one's life goals, be it buying a family home, saving for children's education, having a comfortable retirement, or going on a dream vacation. Financial planning will help you create a timeline that you can follow for your goals. It enables you to focus on how you manage your money, plan for saving and investing and manage your time to reach your financial goals so that you can do the things you desire at the right time. Additionally, financial planning also prepares you for unforeseen situations and emergencies like a pandemic, falling sick, losing your job, or any financial crisis, etc.


Planning your finances smartly is important to accomplish your life goals and lead a secure financial future. It's not like you will wake up one day and magically be ready to purchase a home unless you effectively create a financial plan for it. You will need to save up for a down payment and clean up your debt so that you can afford the house on time. Similarly, unless you plan and put money aside for your envisioned financial goals, you will not have sufficient funds at the required time to fulfil these goals.

How does financial planning work for an individual?

You see, when you are in your 20s or initial stages of earning, it may be intimidating to plan out your finances. Since you may not be sure of exactly where you want to end up or what specific financial goals you want to accomplish. However, financial planning helps you to define your goals and guides you to accomplish them. In simple words, financial planning is a blueprint of your desired goals.

How Smart Financial Planning Can Help You Accomplish Your Financial Goals
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A financial plan provides a comprehensive picture of your current financial situation, your financial objectives, and any potential plans you could make to reach your short term and long term financial goals. Good financial planning should include details about your cash flow, savings, debt, investments, insurance, and any other elements of your financial life.

It is important to understand your financial needs and then create a financial plan to meet them.It can reduce your stress about managing money, support your current financial requirement and help you build a nest egg for your long-term goals, like retirement. Creating a financial plan is important because it allows you to make the most of your assets and gives you the confidence to weather any bumps along the way.

What are the benefits of financial planning?

Financial planning gives you peace of mind, it helps you identify and prioritise your financial goals. There are numerous benefits to financial planning, and below are several key benefits that come as a direct result of creating a financial plan.

  • It helps you increase your savings - When you create a financial plan, you get a good deal of insight into your cashflows, i.e., income and expenses. You can manage your money consciously, and this automatically increases your savings in the long run.

  • Be prepared for unforeseen events - It identifies possible risks and emergencies and proposes solutions, like creating an emergency fund which is a critical aspect of financial planning. This way, you don't have to worry about procuring funds in case of an emergency.

  • Maintains peace of mind - Financial plans provide a guide for informed decision-making. Financial planning helps you manage your money efficiently and enjoy peace of mind. When you are on the path of financial planning, the destination of financial peace is not very far away.

Follow these 7 simple steps to create a financial plan for yourself:

Step #1 - Set S.M.A.R.T Financial Goals

Defining your financial goals is your first step in financial planning. You need to create S.M.A.R.T (specific, measurable, achievable, realistic, and time-bound). A good financial plan is guided by your financial goals. If you approach your financial planning from the standpoint of what your money can do for you, whether to buy a house or help you retire early, it will assist you to save efficiently towards your goals.

You can identify your financial goals with the help of a small exercise; ask yourself:

- What do I want my life to look like in five years?

- Do I want to own a car or a house?

- Do I want to be debt-free? Or Pay off my student loans?

- If you are married and kids are in the picture, Do I need to save for my child's education or wedding expenses?

- How do I imagine my life post-retirement?

Having concrete goals can make it easier to identify and complete the next steps and provide a guiding light as you work to make those aims a reality. You will need to break down your goals into short- and long-term goals to reach them successfully. You can create an effective financial plan but must also commit to following it.

Step #2 - Track Your Money

Seeing where your money goes can help you work effectively towards your financial goals. Get a sense of your monthly cash flow - how much is your income and your expenses against it. An accurate picture of your finances is the key to creating a strong financial plan and can reveal ways to direct more to savings, investing or debt pay-down.

Budgeting is an important aspect of financial planning; developing a budget helps you manage your cash flows, and you can cut back on non-discretionary costs to save more and meet your goals. A budgeting tool can help you assess whether your money is getting spent on unnecessary things. It helps you allocate your funds to different categories like utility expenses, debt repayments, entertainment purposes and towards savings and investments. Several budget planning apps are available in the market that can assist you in precise budgeting exercises.

Step #3 - Plan for Any Emergencies

A major component of financial planning is liquidity management. In this case, a certain amount of money is kept aside for unforeseen events. You need to create a financial cushion or safety net to maintain your financial stability in times of emergencies.

The future is uncertain, a sudden job loss or an unexpected medical emergency can shake up your finances considerably. This is why you need to have an emergency fund to deal with such issues. Ideally, you need to keep an amount equal to 12-24 months of expenses, including loan EMIs as a contingency fund. This can be invested in a liquid fund so that you can access the money quickly in case of an emergency. You can start small to cover small emergencies and gradually increase the fund's investment.

Step #4 - Debt Management

Start by repaying your most expensive debt and plan to pay the rest over time. Eliminating the debt burden gives you more disposable income to save and invest in rewarding avenues. You need to tackle a high-interest debt that pulls out the major portion of your income, leaving you with a small amount to manage the rest of your financial needs.

A crucial step in any financial plan is to pay off your 'toxic' high-interest debt, such as credit card balances, payday loans, etc. Interest rates on some of these may be so high that you end up repaying two or three times what you borrowed. If you're struggling with revolving debt, a debt consolidation or debt management plan may help you wrap several expenses into one monthly bill at a lower interest rate. Avoid borrowing to satisfy your instant gratification; instead, practice delayed gratification to maintain your financial well-being. You should aim to maintain a debt-to-income ratio of below 40%.

Step #5 - Purchase an Insurance Cover

Each one of us is driven by a common goal, i.e., providing a secure financial future for our loved ones and protecting them from any financial challenges. Insurance helps us do that and is thus considered a vital aspect of financial planning. You must have adequate insurance coverage to indemnify the risk to your life and health.

We have seen escalating medical costs over the last few years; health insurance cover assists you during highly expensive medical treatments. It's a medium to protect us from the risk of any uncertain loss that may occur due to medical emergencies. A life insurance cover safeguards your family's financial requirements in your absence (untimely demise). Holding optimal insurance cover for both life and health is essential for your financial freedom. Indian market currently abounds with options on healthcare plans, with many insurance providers offering family floater healthcare plans specifically designed to include senior family members.

Step #6 - Retirement Planning

It is never too early to plan for your retirement; it is a long-term goal that many of you often delay considering it a task for the later years. However, the earlier you focus on building your retirement corpus, the better it is. You will need a certain amount of money in the future to support a comfortable retirement when there is no stable source of income to maintain your lifestyle.

The best time to start saving for retirement is now; starting early gives you enough time to review your investments and realign them as per your prevailing circumstances and the inflation rate. You may consider investing in various suitable investment avenues dedicated to retirement planning, like NPS, ULIPs, Bank FDs, EPF, PPF, mutual funds, etc.

Step #7 - Invest in Your Goals

Many individuals invest without considering the goal behind their investments. Ideally, investors need to identify their financial goals and align their investments accordingly. Invest in your different goals separately and keep the fund allocations distinct. Although it may seem time-consuming, it will help you manage the investments purposefully.

Keep in mind that you have different goals requiring different time horizons and investment amounts. As a result, no single strategy can be used to achieve all goals. You need to invest wisely in rewarding mutual funds based on your suitability. You need to assess the risk you can stomach with each goal and the amount of money required to fulfil these goals.

Due to the sheer power of compounding, the Systematic Investment Plan (SIP) route in mutual funds is suggested to build a corpus steadily over time and generate inflation-beating returns. Various free online tools, like a SIP Calculator, can assist you in determining the exact investment amount required for each goal. Prioritise your financial goals by relevance and accessibility; you can simply create an SIP in mutual funds towards each of your envisioned goals to accomplish them.

To conclude...

Given that, many individuals find it difficult to choose suitable mutual fund schemes to invest towards their financial goals due to a lack of market knowledge and struggle to deal with the high market volatility driven by dynamic market conditions. PersonalFN's SMART Fund Explorer can help you plan your mutual fund investments smartly to achieve your financial goals. You can simply state your S.M.A.R.T financial goals, such as the type of goal (buying a house, car, retirement, etc.), determine a suitable time frame for achieving them, and insert the amount of money that you are willing to invest towards your goal.

PersonalFN's SMART Fund Explorer considering the details entered, provides you with a decent expected rate of return on the investments and the value of investment at the target date. It will offer you with two mutual funds investment options (A & B) that you can choose based on your risk profile. Further, you can also get instant access to the list of the best suitable mutual fund schemes as per your selected plan by enrolling to PersonalFN's SMART Fund Explorer.

This is an opportunity to begin your investment in mutual funds with a smartly selected list of recommended mutual funds by our research team. So what are you waiting for? click on the key to accomplishing your financial goals with PersonalFN's SMART Fund Explorer.


Warm Regards,
Mitali Dhoke
Research Analyst

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