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The phrase “financial planning is a process, not a product” implies the utmost importance of financial planning for long-term objectives and intelligent money management. In other words, the concept refers to the strategy that an individual or an organization should follow to improve their financial health (Nathanson et al., 2021). Furthermore, external factors might significantly impact financial planning, so it should be a flexible and continually evolving process instead of a finished product (Nathanson et al., 2021). As a result, an intelligently financial plan is always unique and should be developed according to the needs of the individual or the organization.
Depending on the types and objectives of the financial plan, the steps might vary slightly. However, the general phases of the process include the evaluation of the economic situation, identification of goals, assessment of external factors, selection of investments, and plan implementation (Nathanson et al., 2021). The first step refers to the comprehensive appraisal of the individual’s or organization’s financial capabilities and initial capital. Consequently, setting SMART (specific, measurable, achievable, relevant, and time-bound) objectives is essential for every financial plan (Nathanson et al., 2021). In personal financial planning, the assessment of external factors refers to the analysis of possible life-changing experiences, such as marriage, relocation, childbirth, and other events requiring extensive capital. Thus, an intelligent financial plan should consider all occurrences that might significantly impact the economic status. The fourth step – selection of investments – refers to the method of how the individual or the organization is going to achieve its objectives (Nathanson et al., 2021). Lastly, it is essential to evaluate the financial plan to mitigate any potential risks and mistakes and, finally, implement it.
Reference
Nathanson, M, Craig, J. T., Geoghegan, J. A., Lee, N. G., Haber, M. A., Haspel, M. B., … Stelljes, S. R. (2021). Personal financial planning for executives and entrepreneurs: The path to financial peace of mind. The Colony Group.
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