Types of Financial Planning

Different Types of Financial Planning

Personal Finance

It is no secret that just earning money is not enough. To face the world, to be ready for anything that comes your way, or even to be safe, you need to understand the concept of financial planning.

Financial planning is nothing but a systematic approach following which individuals can devise a well-thought plan to manage their expenses and fulfill their financial goals. It helps save and manage the expenditure to be future-ready.

Financial planning is one of the most crucial skills in this world. It is not a rare or occasional thing. You need to understand financial planning in order to do anything in life. With money touching almost all aspects of your life, financial planning is irreplaceable. Learning to manage money and types of financial planning should be a top priority for everyone today.

Financial planning is not a one-way route. You need to take lefts and rights and go deep and over the bridge to devise a comprehensive plan to manage your finances. It can be a bit confusing at first, but once you get a hold of it, you get to the highway.

The first step to understanding financial planning is to know the different types of financial planning.

Types of Financial Planning

There are several different types of financial plans that you can choose from. The different types of financial planning are:

1. Cash Flow Planning
2. Investment Planning
3. Passive Income Planning
4. Insurance Planning
5. Tax Planning
6. Real Estate Planning
7. Children’s Future Planning
8. Retirement Planning

The above types of financial plans are simplified in the paragraphs below:

1. Cash Flow Planning

The meaning of cash flow in layman’s language is incoming and outgoing cash or money. To understand your income and financial status, you should check your income and expenditure. This is one of the most important types of financial plans. This is because you get a clear picture of your actual value and need to set your financial goals clearly. Setting the goals, in turn, will help you choose the best types of financial plans for yourself.

These types of financial plans ensure that a person has a suitable amount of savings in emergencies. With this clear data, you can figure out more productive ways to invest and use your money.

2. Investment Planning

Investment Planning is one of those types of financial plans that allows you to process and identify your financial goals. It will help prioritize the different types of financial plans you have in mind.

It is a well-known fact that if you want to retire peacefully or accumulate enough wealth, you must figure out different investment channels. Knowing your options from understanding the different types of financial planning will make it easy to streamline the different sources of investment to yield maximum benefits.

You can choose from financial instruments like debt securities, equities, mutual funds, etc. A typical example is an investment in mutual funds. A long-term investment yields a really handsome compounded result.

3. Passive Income Planning

In simple words, one can define ‘Passive Income’ as an income source that is not directly affected by your participation. It does not matter if one spends his/ her time or efforts to bring in that money. Speaking of which.

The Tradex app serves as an excellent source of passive income. Don’t know what it is? It is a Y-combinator-backed alternate trading platform that allows you to earn money by trading on your opinions. From entertainment to business, anyone can place bids on events as per their choice and interest.

Even if you do not trade directly on this application, you are eligible for a referral income from your referred friends on Tradex for a lifetime. For every successful referral, one gets 0.25% of the trading fee of the total amount traded by friends and family. Isn’t that great?

In this digital world where major tech applications provide only a one-time referral bonus for alluring people to their platform, the Tradex app is helping people to create a stable source of passive income.

4. Insurance Planning

Investment planning is one of the most important types of financial planning because problems tend to come unannounced. Saving enough for unpredictable requirements or risks is one of the second wisest things anyone could do. The first one is buying insurance. This is one of the most basic and essential aspects of all types of financial planning.

Investing in a good life and health insurance should be the first thing on your checklist. Other than these, one could also invest in vehicle or home insurance to have decent insurance coverage in case of mishaps.

5. Tax Planning

A large chunk of the money earned could go out to paying taxes. You must be careful in planning your tax submissions for the most benefits. Investing in many tax-saving instruments will help you in minimizing your taxable income. This will be beneficial in two-fold. First, you will have invested in many options, giving you great returns. Secondly, You’ll be exempted from paying high taxes.

This kind of knowledge will come from comprehending the other types of financial plans, which will help in investing better. Even the Government promotes these schemes as it helps in empowering the economy and financial markets.

6. Real Estate Planning

Real Estate Planning is one type of financial planning considered a low-risk investment yielding high returns. Anyone can easily analyze the market prices of a place along with future inflation and other things to make a well-planned decision.

In case of an untimely death of the owner, the property can easily be transferred to their heir. This will act as a safety net just like other types of financial plans but in a more sorted manner.

7. Children’s Future Planning

With education costs skyrocketing each day, children’s future planning is one of the types of financial planning, which is more of a necessity rather than an option. If you have kids, Children’s future financial plans should be well-sorted from your end at the right time.

Investing in these types of financial planning will only make your life 100 times easier and would be the best thing for you and your children.

8. Retirement Planning

Financial independence is the most desirable thing for any individual. To reach a stage of financial independence, especially at retirement age, you need to lay the groundwork properly. This groundwork is possible only if you clearly understand the different types of financial plans available in the market. This would ensure that you have adequately invested, considering all aspects of different types of financial plans.

Investing and saving for retirement should not be neglected as by saving enough, you can lead a laid-back time relaxing and enjoying with your family.

How can you create a Financial Plan for yourself?

Understanding the different types of financial plans, and creating a financial plan becomes easy. To make it more simplified for you, here are a few basic steps to achieve financial independence.

  1. Lay down your financial goals and make them your milestones. These goals help clarify your current financial status, and aligning it with your goal makes it easier and more streamlined.
  2. The second step is to know your income and expenses. This will help in setting a budget. With a budget in place, you know the essential expenses and the expenses that you can avoid. With this knowledge, you can plan and invest much better.
  3. Tax planning and knowing the different investments that save tax will help you cut a lot of unwanted expenses, saving you considerable amounts of money.
  4. Once these three things are in place, building an emergency fund should be the next step. An emergency fund is nothing but a pool of money you can save to use later in an emergency. Ideally, an emergency fund should have an amount equal to 5-6 months of your average earnings.
  5. When managing money, cutting down on high-cost debt and consolidating multiple loans is a smart move.
  6. Ensuring the safety of yourself and your family should be the first thing on your priority list when you are doing financial planning. Buying good health and life insurance is the way to go.
  7. Work on your retirement fund to sit back and relax in your old age. This also ensures that your children and family are well taken care of.
  8. Create smooth succession planning. Passing your assets to your family so they can live hassle-free is a crucial step when all is done.


Being financially independent should be the first thing everyone should tick off their bucket list. One should think and plan as per the short and long-term goals. Understanding the different types of financial plans is the first step toward it.

You must be well informed before making any decision related to finance and investment. So read up about different types of financial planning and ask for professional help.

So get wise and start investing.

Types of Financial Planning – FAQs

What are short-term and long-term goals in types of financial planning?

Ans. There are no specific definitions of short-term or long-term goals in different types of financial plans. Individuals might define it as per their personal and professional requirements and goals and the types of financial plans that they are going after.

But generally, a short-term goal is for the upcoming year, a mid-term goal is for the next five years, and a long-term goal can be defined as a goal that goes beyond five years.

Saving vs. Investing, What’s the difference between the two types of financial planning?

Ans. Saving money means setting aside a part of your income regularly in a safe space.

On the other hand, investment is a lucrative means to grow your saved money faster.

What are the Dos and Don’ts of different types of financial planning?

Ans. The do’s and don’ts remain the same for all types of financial planning.

Do’s- Starting early, budgeting, acquiring assets, Setting up financial plans, Insurance, and emergency funds.

Don’t’s- Prioritizing wants over needs, being stuck in the debt trap, No financial literacy.

What is the importance of investment in financial planning?

Ans. Whatever type of financial plan you have, investment is the primary fuel to your financial goals. Hence it is most important.

Is it necessary to have Insurance in financial planning?

Ans. Insuring yourself and what you have is the most crucial thing and should not be ignored at any cost.


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