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What exactly is Financial Planning – 8 things we learnt after working with 300+ clients

by Manish Chauhan · 21 comments

- This article is written by Nandish Desai

“Financial planning” is the NEW buzz word these days all over the internet, TV channels and newspapers. These days even bank employees are selling a lot of financial products on the name of “Financial Planning” . Investors are literally bombarded with the word – Financial Planning from various sources like blogs, articles, advisors and every mutual fund and insurance agent, and the flow of information has created some kind of mental image in investor’s mind about – “what is financial planning?”.

In a typical financial planning exercise, a financial planner goes through your financial data and then draws a written financial plan, which touches upon various area’s of your financial life like life insurance, health insurance, asset allocation, retirement, children goals etc etc. But in this article we want to add more dimensions to what is financial planning, and want to add a whole new perspective to what is financial planning. The article’s motive is to help you to see financial planning process with new and empowering perspective.

what is financial planning

Our view of “Financial Planning”

We feel that at Jagoinvestor – even our own view about the term called “Financial Planning” has changed over a period of time and we would like to share the same with you all today. We have worked with close to 300+ clients till date and today we want to share our learning and insights which we have drawn from our experience in so many years. With every passing day we are evolving inside our profession and we also want our readers to grow with us.

What Investors and Financial Advisors think about “Financial Planning”

We want to know what do investors and various financial advisors connected to us on social media think about “Financial Planning” , We wanted to know from them what is their view about “What is Financial Planning?” . So we asked them on facebook here and here. We got lots of answers and we are sharing some of them with you below. There is no wrong or right definition here, so we just collected few answers from investors and financial planners and we want to show you what they think about it.

financial planning meaning

8 insights about Financial Planning

Now We will share with you 8 insights about how to perceive financial planning in a new way. We feel a big number of investors and financial advisors have a very narrow view about “financial planning” and its potential. We simply want you to see Financial Planning tool with fresh pair of eyes. May be it’s time to question our perception about what financial planning is all about. Here are those 8 insights below.

1. It is not about securing future, it is designing your present

A lot of investors and advisors think that financial planning is about future, in our view it is not about future. Financial Planning is an exercise that helps you to design your present as an investor. Future is an illusion and it just does not exist in reality. You have to use financial plan as a tool to make each day/week/month and year your best financial year. A lot of investors think with the help of financial plan I am going to secure my future, but in reality it is about learning to play fully in this very moment.

Let me share an example with you – All the investors who drop a financial planning inquiry on our services page – we usually ask them why they want to go for financial planning and what financial planning means to them ? And the most common answer we here is, “I want to do financial planning, so that I can secure my long term financial goals like children goals, retirement etc.”

They think financial planning can help them to be more secured. We ask them to stop over focusing about future and look at what best they can do right now with their financial resources.

2. Financial Plan is not about “Financial Goals”, it is about Financial commitment

A lot of people think financial planning is only and only about financial goals. May be financial goal is one small part of the whole financial planning exercise, but surely its not only about financial goals.

In our view it is about strongly announcing your financial commitment and what you are going to do now on-wards in your financial life and then sticking to your commitment. We encourage all our clients to announce their monthly financial commitments. Setting financial goals is extremely easy, but sticking to your monthly financial commitments is where the rubber meets the road.

Let me share with you something about our clients, what we do with our clients – When we get on call with any investor clients of ours, they bring all their WANTS on table (difference between Needs vs Wants here) . Wants like second home, A lot of clients want to even plan for the kid who is not yet born. Now, the moment we start the commitment conversation the goal list starts to shrink. Commitment is doing what is required to get what you want and not allowing anything to get in your way.

3. Financial planning is NOT about bringing Certainty

As human beings we are always attracted to Certainty. Most investors want to know whether they will be able to achieve their financial goals or not ? This is the core reason why they hire a financial planner! . In our view the best thing about life is that it is mysterious and uncertain. If we pull uncertainty out of future then it is no longer the future; It is present – which is projected forward and nothing else.

We want investors to hire a financial planner not only with core focus of bringing certainty, but to building financial muscle, to face every kind of situation that life throws at you, to bring more completeness in various areas of financial life, to get an external opinion about your financial life.

We have seen this happening with many investors – No matter how much they plan, life turns out the way it turns out. Now this does not mean you should not plan, but you should develop your mind that is constantly planning in face of what happens.

4. It is NOT about financial plan, it is about the Journey

We find so many investors and financial planners – who are totally attached to the document called “Financial Plan”. They pick small small things from the PDF document given to them and over focus on them, it might be some number , some fund name or some assumption taken.

In our view the real results are not inside of a financial plan, they are located outside of a financial plan. We ask our clients to draw key learning’s from the financial plan and then throw away the plan. Every investor is on some journey and it is important to enjoy the journey. If you are not enjoying the wealth creation journey, you will never enjoy the so called destination.

We have seen people who after reaching the age of 55 or 60 years of age, tell us that it is the financial journey that matters at the end and nothing else. When we work with investors we just do one thing, we simply ask them to enjoy the process of wealth creation. This eliminates all the worries from your head and helps you to take proactive actions in your financial life.

5. It is NOT about picking perfect financial products

In our view financial planning is not an exercise to pick right or perfect financial products. A lot of investors spend maximum time in “Which Mutual Fund is Best?” or “Which Health Insurance policy premium is lowest?” and similar points. While that’s important to some  level, but finally wealth creation is all about testing and exploring.

A lot of investors fail to create wealth because they stop testing and exploring. A good financial planner will always encourage their clients when it comes to testing and exploring new things. He/she will educate you in a way, such that you are motivated to test new things in your financial journey.

A good planner will always say “Don’t’ worry I won’t let you fail but I want you to test new things as an investor”

When we work with our clients – we ask them to test new and unknown territories. We once asked one of our client to think about creating an alternate income even though he was working in a software company. We asked him to cross his mental barriers and keep looking at opportunities. Few months later, In one of the offices, there was a food counter in cafeteria space, which he setup and hired a worker and it was doing well , The question is not what happened later, but the main thing is that he explored some new ways of earning money.

Then there are so many investors who never ever invested in mutual funds thinking it is a risk proposition. We ask them to test this new route and we become their guide. We helped them clear their myths about equity products and once they become comfortable, they started exploring it.

6. Financial plan is not about products, calculations and returns, it is about YOU

The number one expectation an investor holds in his mind is to find a financial advisor who helps him/her to get more returns. “A Financial Plan  is not about products, returns and calculations, it is about YOU” – This line is from my book “11 principles to achieve financial freedom”. This entire book has no numbers and calculations in it, it teaches an investor to develop right kind of mindset in the area of money. Financial planning is an opportunity to be 100% honest in the area of money so that you can work on your discipline level and can make corrections as an investor.

Let me share an small experience here. I was working with a client who told me – “I have no idea why my financial life is not good”.

I simply asked him to get the truth on table, I asked him to search inside him to get real answer. He finally agreed and owned all his mistakes and took entire responsibility of his financial situation. It was painful for our client, but things started to shift when the truth got on table. This realization and acceptance gave him a lot of power to change things. It was all about HIM and not about situations and circumstances.

7. Financial planning is NOT about advice, it is about ACTION

The old definition says that financial planning is process where two people connect, number crunching takes place and advice is imparted on what needs to done.

Giving or taking advice is just 20% of the job done, because the rest 80% is all about taking actions. More and more investors will make the most of financial planning tool when they will take actions, because at the end only action produces results and nothing else. As an investor check, how action oriented your advisor is or how action oriented you are as an investor?

A lot of readers write to us and say – “Can you advice me on so and so issue ?” . We say – “NO , We will help you to gain insights along with giving advice so that you are empowered to take actions”

We ask our existing clients to report their weekly personal finance actions to us. This is how things start to shift in their financial world. In our facebook bootcamps, we focus on taking actions for 6 weeks and we have helped more than 250+ investors to make their financial lives awesome till now (5 bootcamps are over, register for the next bootcamp) .

Look at one of the recent bootcamp sharing where, one of our participant “Sachin Gopalkar” is sharing what all actions he did while he was in bootcamp

Jagoinvestor bootcamp sharing

8. Financial plan has to be a LONG document

Who the hell says financial plan has to be a long and lengthy document. You won’t believe, but there are many softwares which financial planners use and all these softwares are in the race of 30-50-100 page financial plans. Even a lot of financial planners believe that longer the document they give to client, they can showcase the work done by them and all the “analysis” they did. They feel that can justify their “work-hours” put in the financial planning exercise and help them to charge more fees.

But, almost all the investors we have talked to till date are not looking for a lengthy plan; All they want to learn is how to get in control of their financial life. Lengthy documents just confuse the clients. After looking at number of pie charts and heavy graphs and complex calculation tables in the financial plan, investors get more frustrated.

Why not give a financial plan that the investor can own and implement, why not give a one page plan  or may be something which is short and sweet. A short plan, which only has something which really matters to clients and makes it easy for them to understand their own financial lives.

We once gave an option to one of our clients – “Do you want a 15 page financial plan or a 1 page plan?”. He said, “I will be thankful if you can give me a 1 page plan”. And we gave him a one page plan, which was sufficient for him to take important actions in his financial life.

Conclusion

Now, you have a whole new perspective on how to look at financial planning and you also know how not to look at financial planning. Share what is it that stops you from getting a financial plan, what stopped you till date? Is it about your lack of understanding, lack of belief in financial planning or something else? Do share your views on today’s article, I have not been very active on writing articles but from now on I will see that I share my views from time to time.

– This article is written by Nandish Desai

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{ 21 comments… read them below or add one }

1 dinesh jain March 11, 2014 at 6:55 pm

Hi nandish/manish..

Being an advisor, have learnt a lot from you.

Very nice article..

Now I could remember few things from your book “11 principles to achieve financial freedom” in which you have stated that financial planning is not about setting your financial goals bcz the moment you are born your retirement goal is being set and the moment you got married your’s children education and marriage goal is being set. Rather financial planning is abt setting your weekly/monthly/yearly income and savings and bringing commitment and persistency in your investment.

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2 Manish Chauhan March 12, 2014 at 4:37 pm

True .. some financial goals are SET already , and some you set ! .. not all !

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3 Bharat Jhala March 11, 2014 at 11:56 pm

Hello Nandish,

Very nice article. These 8 points offers great clarity of what financial plan is and isn’t. Ultimately it is clarity which gives us vision, direction, focus, confidence and eventually peace of mind through correct actions.

Following all your advises gained in bootcamp and learning everyday from wealthclub.

Great job, keep it up, and thank you very much.

Bharat

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4 Manish Chauhan March 12, 2014 at 4:19 pm

Welcome Bharat :)

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5 Prashanth Dixit March 12, 2014 at 10:55 am

Hey Nandish,,

Very well written..the main thing i like about the way you guys think, write, advice and make the investors gain a very good experience in their financial journey rather than just reaching (or trying to reach) their goals.

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6 Manish Chauhan March 12, 2014 at 4:19 pm

Thanks Prashanth :) .. So you also agree that goals are just one small milestone in overall financial planning !

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7 Divya March 12, 2014 at 11:41 am

Hello Nandish and Manish
I agree that financial planning is not a big lengthy document and is not about mega actions. It is about small things we plan and put into action on a daily or weekly basis. The little things add up in the end. Slow and steady wins the race. Thanks for writing a nice article.

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8 Manish Chauhan March 12, 2014 at 4:18 pm

Thanks Divya

Thanks for acknowledging , did you feel the same way with your clients ?

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9 Sambaran Mitra March 12, 2014 at 2:29 pm

On a slightly different note:
The most difficult part about using a financial-planner is finding a good one.
How do I know whether I am getting a good financial planner? The only way to assess is to figure out the track record of the planner. That is so difficult to do. It is not easy to judge a financial planner.

I have a financial problem that I will like to resolve. It is a very specific case and a case fit for hiring a good financial-planner (who also knows about tax thoroughly). I took a reference from a friend about a financial-planner (let us call Mr. FP). I called Mr. FP and explained him about the situation and how/what-terms we can set. Mr.FP considered many of my requests and decided that it is not his job to solve those. So how can a person like me proceed? It seems at the end of day, do it yourself is the only way to go.

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10 Manish Chauhan March 12, 2014 at 4:14 pm

Hi Sambaran

Thanks for sharing your views . You have indeed come out with a very real issue of How to find a good financial planner ? But then , its something no one can answer . SOmewhere it depends on the financial planner also on how he is able to convince you for his services . What kind of vibes you get by talking to him for initial few times .

Regarding your issue , I can tell you that most of the financial planners will not be able to help you a lot of tax planning in very details, because financial planning is not tax planning . Only a good CA will be able to help you if its really a deeper taxation issue . If its basic level tax thing , then a good financial planner will be able to handle it .

So I suggest, better contact a CA . Financial Planning at some level , you can take few actions at your own level

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11 Abbasali Mava March 12, 2014 at 6:44 pm

Great article once again Nandish!

Really thoughtful ideas shared by you and i could surely change my relationship towards Financial Planning after reading this article. Nandish I suggest you to write one articles on “How to write short and simple yet powerful Financial Plan?”

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12 Manish Chauhan March 12, 2014 at 8:36 pm

Very good point Abbasali

We will surely do a write up on that topic !

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13 Chandrashekar Iyer March 12, 2014 at 11:49 pm

Hi..

Thanks for showing new aspects and outlook towards personal finance. But there are some aspects request for your briefing:

A) Not for future but to design present : Request you to throw some more light on this aspect as this is completely new concept for me.
B) Financial Plan is not about “Financial Goals”, it is about Financial commitment : I agree with the fact Commitment plays a important role in financial planning. But when a person is not aware of his/her destination how one can find path to reach.
C) It is NOT about picking perfect financial products: I strongly agree with this point, an individual should not stick to one product but should keep on reviewing portfolio on timely basis and do necessary changes.
D) Financial plan is not about products, calculations and returns, it is about YOU : Its a point where we as a investor and adviser should start focusing, Returns forms a major part on our life both reciprocate on the same line while discussing personal finance.

Once again thanks you for such a wonderful article. Looking forward for your valuable inputs.

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14 Nandish March 13, 2014 at 2:44 pm

Hey Chandrashekar,

A) Not for future but to design present : Request you to throw some more light on this aspect as this is completely new concept for me.

Reply: For example we are right now in the month of march now no matter how hard you try you cant step in to the month of April or go back in the month of feb. We want to encourage investors to put the right seeds in the month they are into. It is about being in present. If you make your month special, your year will get special on its own and eventually you will create a wonderful financial life.

B) Financial Plan is not about “Financial Goals”, it is about Financial commitment : I agree with the fact Commitment plays a important role in financial planning. But when a person is not aware of his/her destination how one can find path to reach.

Reply: Most investors have financial goals but the game changes when your goals start to have YOU. My goal has to wake me up and has to get me into action every single day. Set goals so that you can use your goals to bring the right kind of commitment in your financial life.

Lets say I want to earn 1 crore from my business in next 3 years now I need to use this business goal to make solid commitments in my business. My business goal has to impact my daily business actions. A lot of investors set goals, get clarity about calculations, how much they will need but this wont serve them.

Hope this helps you my friend.

Wish you all the best

nandish

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15 Chandrashekar Iyer March 13, 2014 at 11:55 pm

Thanks Nadish for your valuable revert and showings new colors in Prism of Personal Finance.

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16 Chandrashekar Iyer March 16, 2014 at 12:06 am

Will appreciate your inputs .

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17 AtanuGupta March 13, 2014 at 2:40 pm

Good article.

But the main thing is that every individual should have a basic knowledge of personal finance. Our education system should start this right from the school itself otherwise we will continue to fall in the hands of fraudsters and self declared planners who will make their own financial life healthy instead of their clients.

No matter how good the financial advise you get from your financial planner, the lack of basic knowledge will always make you feel that somebody else could have a better advise and solution.

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18 Manish Chauhan March 26, 2014 at 7:49 pm

100% right

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19 SIVA PRASAD RAVIRALA March 15, 2014 at 10:45 pm

Really nice article. Very impressive.
Financial planning is not about financial goals but about financial commitments- Great Words.

SIVA PRASAD

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20 Manish Chauhan March 26, 2014 at 7:28 pm

Welcome !

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21 Avinash August 20, 2014 at 8:47 pm

Manish/ Nandish

Very nice article !
Forced to change the entire view about Financial Planning.

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