Financial Planning: What is it, and how does it work?

November 08, 2022

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Master ImageFinancial planning is a must when it comes to business and money administration in general. One should have a plan before focusing on any kind of activity that includes risk in it. With money, we all clearly know that it can be very volatile and that there are a lot of ways to make mistakes, either making a bad investment, an unsafe deal, money lending or perhaps a shady contract that you didn't know well about because of poor attention to detail and financial planning along with perhaps lack of a long term vision. Money can be the cornerstone of a person's life. Whether it is ensuring that you have food on your table and a roof over your head, or saving for a hopefully good retirement.


As such, managing your money wisely is something essential. And here is where the practice of financial planning and its different aspects come in. Thus, you need to know that there are several key aspects that form financial planning, but before we get into it, we need to clarify the term and answer some questions:



So, what is financial planning?

Sometimes also referred to as an investment plan, financial planning is the process of evaluation and estimation of your current finances for managing your money using common known financial variables to do predictions of future income, withdrawals plans, or assets values. In simpler words, it is a step-by-step strategic plan to meet your personal life and financial goals. This kind of plan helps your general administration and can even protect your finances throughout your life and business journey. Financial planning enables you to control and manage your income and each one of your spending if you feel like keeping an eye out for every penny. In other words, it guides you towards making more practical and rational decisions about spending and saving whatever amounts of income you get in your hands, so you can achieve true stability, business success and financial independence.

Financial planning can help you reach your economic goals including things that we all look for at a given point like: Getting your own home, or getting a better one, getting a new car, a career, vacations abroad with your family, and of course, creating your own business and being financially independent after your time for retirement comes



How does financial planning work?

It all starts with an evaluation of your current financial situation. Then it requires a good understanding of different terms and procedures related to the planning. Then you have to start growing it as a roadmap where you can visualize your current situation, your different projects, the possible outcomes and of course the income you count on, being this active, passive, or both. So, these are the key aspects to understand for a financial plan to work and help you achieve your goals:

  • Investment: Investment is perhaps the most critical aspect of them all because it is the different focuses and uses you will give to your capital. This includes a well crafted portfolio maintenance and performance, and business related topics like reward, risk and correlation.

  • Risk: This one refers to the different hidden changers, and finance sticky points that could prevent you from reaching your personal finance and business goals in general.

  • Taxes: In financial planning, the taxes section is used to shrink your tax load, so you can have less stress and more money saved and left over to be used for your roadmap and reaching your goals.

  • Financial health: It is a very important category that includes different aspects in good standing like the evaluation of your net worth, the rational administration of your budget and the general cash flow that you may have in your life or business.

  • Education planning: As the name says, this one is regarding education. It is basically like financial planning in general, but with a focus only on education. It can be the plans for either you, your kids or someone you want to support with their education, so resources can be well spent throughout time.

  • Estate planning: It can help you out from having a lot of stress in the future because it is a process of anticipation and arrangements throughout your life. For the management and evaluation of a person's state in life, or in an event of incapacitation and after the death of a person.

  • Retirement: For any person that wishes to have a good elderly, retirement planning is a must because this helps you out managing the resources you count with and the possible income you may receive from your properties, a pension, inheritance, or why not good luck.



  • Conclusion
    Financial planning is an extremely necessary way for developing your life plan and reaching your goals with different administrative and economical tools that help you out creating the plan that could help you reach everything you always dreamed for.

    At Tru Capital, we are committed to redefining small business lending by offering a wide range of financial products. If you have any questions or would like more information, please call or text us at 917-243-3113.


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