- March 2, 2022
- Posted by: Virg Cristobal
- Category: Finance
There are two main purposes for financial planning: to ensure the availability of your funds whenever you need them and to keep the budget in check, either with yourself or with any financial planning firm.
Financial planning can be done in business or personal. Simply maintaining a budget is a form of financial planning but what we’re talking about here is on a larger scale. This is lifestyle planning, estate planning, and wealth management.
Is wealth management the same thing is financial planning?
If you’re debating on financial planning versus wealth management, there is a slight difference between the two. Financial planning deals with finances such as budgets, investments and the like. Wealth management is typically more for the elite or those with high incomes. However, managing wealth at any level is never a bad idea.
Wealth management plan is the process to manage one’s wealth to preserve and grow it as necessary. Financial planners and wealth managers will identify certain opportunities and execute financial goals for both long term and short term. While this is similar to financial planning it does have a different dimension to personal finance. Financial planning is for everyone where wealth management may not be.
A wealth manager is inclined to retain wealth and grow it regardless of the magnitude even though it is typically based on a higher income scale.
Financial planning can also be used to check if the financial planner is using resources unnecessarily. Excess funding can be just as detrimental as inadequate funds. If there’s a surplus it must be managed properly and invested to the best possible manner to keep the resources moving in the right direction. This also prevents any great loss.
Related: Wealth Management for Diverse Needs
Five features of financial planning:
Flexibility: a plan should be flexible as it needs to adjust according to the needs as they change.
Optimal usage: a financial plan should be able to utilize any idle money and assets, growth and increase so that nothing sits by or is wasted.
Foresight: a financial plan must estimate risk and the need to liquidate when necessary. It should be able to predict what’s going to happen to the funds.
Simplicity: the plan should be simple in terms and structure offering sound allocations of resources.
Liquidity: financial planner should be kept current with the assets, cash, and cash equivalent to provide easy allocation and payments when necessary.
Financial planners should create the optimum use of those funds. This might be within business or even personal. While these funds can be small or large, wealth management typically takes over when the amount of money is of a higher net worth, typically around $1 million or more.
Financial planning can be done at any stage in life but the sooner the better. For more information on financial planning, contact Chrome Advisors today.