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A Financial Plan paints   a comprehensive picture of your current finances, your financial goals   and any strategies you've set to achieve those goals. Good  financial  planning should include details about your cash flow,  savings, debt,  investments, insurance and any other elements of your  financial life. 

Proper Financial Planning helps people achieve their financial goals e.g. home purchase, children's higher education, children's marriage,   retirement planning, estate planning etc. and long term financial   security. 

Financial planning allows you to achieve your financial goals,   be it buying a family home, saving for children's education, having a   comfortable retirement, or going on a dream vacation. It also prepares   you for unforeseen situations and emergencies like falling sick, losing   your job, or having to renovate your house 

Financial management helps you in Budgeting your income.   Budgeting helps in planning your income where your money should be   spent, how much income should be saved, how much should be invested.   According to your lifestyle plan, stick to what you have budgeted,  avoid  overspending and direct your money towards savings. 

Financial planning helps   you understand your goals better in terms of why you need to achieve   these goals and how they impact other aspects of your life and finances. Planning encourages you to manage inflation. 

Long-term goals are those that are 10 or more years away—including marriage, having a family and, of course, retirement.

While  there are many ways to go about developing a plan—do it  yourself, use a  robo-advisor, work with a financial planner, or a  combination thereof,  Studies have identified the eight critical components  every plan  should include, regardless of the method used to create it.

You  can’t make a plan until you know what you want to accomplish with  your  money—so whether you’re creating it yourself or working with a   professional, your plan should start with a list of your goals, both  big  and small. It can help to organize them by how soon you’ll need the   money:

• Short-term goals are those you hope to achieve in the next five years—such as paying off debt or buying a new car.
• Medium-term goals are those you hope to achieve in the next five  to  10 years—such as the down payment on a home or starting your own   business.
• Long-term goals are those that are 10 or more years away—including marrige, having a family and, of course, retirement.

For each goal, specify a Rupee  figure and a target date. The  more specific your goals, the easier it  is to measure your progress  toward them,.

A  host of online tools can help you run the numbers, weigh competing  priorities, and determine  the best course of action for you. And if you  have multiple goals to  work toward, a robo-advisor, or automated  investing platform, can help  you weigh the importance of each goal,  ranking them by needs, wants, and  wishes.

Ideally,  you start investing for financial goals early in life, but  any time is  a good time to check in on your current financial situation  and assess  how you’re doing—Are you still on track? Do you have other  goals you  hadn’t previously considered? Having a financial plan helps  you assess  where you are today and where you want to go next.

Every  plan needs a baseline, so next you should determine your net  worth.  Make a list of all your assets (bank and investment accounts,  real  estate, valuable personal property) and another one of all your  debts  (credit cards, mortgages, student loans). Your assets minus your   liabilities equals your net worth.

Don’t  be discouraged if your liabilities outweigh your assets, That’s not  uncommon when you’re just starting out—especially if  you have a  mortgage and student loans.

Your  budget is really where the rubber meets the road, planning-wise.  It  can help you determine where your money is going and where you can  cut  back in order to meet your goals. 

A  budget calculator can help ensure you don’t overlook irregular but  important expenses,  such as car repairs, out-of-pocket health care  costs, and real estate  taxes. As you’re compiling your list, separate  your expenses into two  buckets: must-have items such as groceries and  rent, and nice-to-haves  such as eating out and gym memberships.

When  considering how your goals fit into your budget, you may want to   pressure-test it using “what if” scenarios: What if you want or need to   retire earlier? What if you downsized your mortgage? Some  robo-advisors  offer tools that allow you to adjust certain assumptions  to see how  they could affect your savings strategy.  

Debt  is sometimes treated like a four-letter word, but not all debt  is bad  debt. A mortgage, for example, can help build equity—and boost  your  credit score in the bargain. High-interest consumer debt like  credit  cards, on the other hand, weighs heavily on your credit score.  Plus,  every Rupee you pay in finance charges and interest is one you  can’t  put toward other goals.

If you have  high-interest debt, make sure you create a plan that can  help you pay  it off as quickly as possible. If you’re not sure where to  start, a  financial advisor can help you prioritize, then determine how  much of  your budget should go toward your debts each month.

An  old rule of thumb says you’ll need approximately inflation adjusted 80%  of your  present income in retirement. However, this assumes that  retiring will  free you from any work-related expenses and taxes, that  you’ve paid off  your mortgage, and that your children will be  financially independent. 

It’s also  important to keep in mind that Medicare doesn’t cover  everything, and  health care expenses that Medicare doesn’t cover—such as  long-term  care—can add up quickly. You also might spend more on other  things in  retirement, like travel, dining out, gifts, or financial  support to a  relative or friend.

Plugging in different scenarios into a retirement savings calculator can help you figure out what you may need in retirement. Last not least  to maintain your current lifestyle in retirement years inflation is  important aspect that should be factored in the calculations.

If  you’re saving 20–30% of your pre-retirement income, then the 80%   income-replacement rule is a good place to start. Otherwise, it’s safer   to aim at covering 100% of your pre-retirement income, less whatever   you’re saving for retirement. As with any general rule, there are  plenty  of exceptions. So be sure to sit down and fine-tune your  retirement  budget as the time draws near. This should be your top  priority, since  you can borrow for most other goals but not for  retirement.

When  something unexpected happens—you lose your job, for example, or  get  hit with an unexpected medical bill—an emergency fund can help you   avoid tapping your long-term savings to make ends meet.

It’s  generally a good idea to save enough to cover at least three   months’—but ideally six months’—worth of essential living expenses   (e.g., groceries, housing, transportation, and utilities). Save this   money in a highly liquid checking or savings account so you can access   it in a hurry should the need arise.

Insurance  is an important part of protecting your financial  downside—but neither  should you overpay for coverage you don’t need. In  general:

• Health insurance:  Without it, even routine care  can cost a pretty amount, while a  serious injury or hospital stay could  set you back tens of lacs of  Rupees. As you get older, you may  want to consider long term care insurance, as well.
• Disability insurance:  This coverage protects you  and your family in the event you’re unable  to work. Employer-provided  disability insurance typically replaces  about 60% of your salary.
• Auto and homeowners’/renters’ insurance: If you own a car or home—or rent and can’t afford to replace possessions out of pocket—make sure you’re adequately protected.
• Life insurance:  This is generally a good idea for  those with dependents. Work with an  insurance agent to understand what  type of—and how much—coverage makes  the most sense for you.

At  a minimum, you should have a will, which states your final wishes  with  regards to your assets, dependents, and who you want to administer   your estate. You should also keep the beneficiaries of your insurance   policies and retirement accounts up to date. Also consider establishing   powers of attorney for financial and health care decisions, in the  case  you become incapacitated.

For  help getting started or tackling more complex estate-planning tasks,  consider working with an estate attorney or a qualified financial  planner.