Personal financial planning, broadly defined, is a process of determining a person’s financial goals, their purposes and priorities in life, then, after considering their available resources, risk profile and lifestyle factors, to draw up a balanced and realistic plan to achieve those goals. The individual’s goals become the guideposts to map out a course of action towards reaching those goals.

In the process, each goal is examined to ensure that the goal is meaningful within the context of the individual’s own situation, carefully analyzing these goals, considering the individual’s current and future resources. In the process of goal analysis, any constraints and obstacles are noted. If the resources are insufficient or absent to meet any of the goals, the particular goal will be adjusted to a more realistic level or will be replaced with a new goal.

Planning often requires consideration of self-constraints in postponing some enjoyment today for the sake of the future. To be effective, the plan should consider the individual’s current lifestyle so that the ‘pain’ in postponing current pleasures is bearable over the term of the plan. In times where current sacrifices are involved, the plan should help ensure that the pursuit of the goal will continue. A plan should consider the importance of each goal and should prioritize each goal. Many financial plans fail because these practical points were not sufficiently considered.
People enlist the help of a financial planner because of the complexity of knowing how to perform the following:

  • Providing direction and meaning to financial decisions;
  • Gaining an understand how each financial decision affects the other areas of finance;
  • Assisting the person to adapt more easily to life changes in order to feel more secure.