1. 2018
Mohammed Sroor
SCM Officer at Al-kadi holding Co.
6/29/2018
What is Financial Planning means?

2. What is a 'Financials Planning?
A financial plan is a comprehensive evaluation of an investor's current and future
financial state by using currently known variables to predict future cash flows, asset
values and withdrawal plans. Most individuals work in conjunction with a financial
planner and use current net worth, tax liabilities, asset allocation, and future
retirement and estate plans in developing financial plans. These metrics are used
along with estimates of asset growth to determine if a person's financial goals can be
met in the future, or what steps need to be taken to ensure that they are.
Breaking Down 'Financial Plan'
Financial plans don't have a specific template, though most licensed professionals
include knowledge and considerations of the client's future life goals, future wealth
transfer plans and future expense levels. Extrapolated asset values determine
whether the client has sufficient funds to meet future needs. A good financial plan
can alert an investor to changes that must be made to ensure a smooth transition
through life's financial phases, such as decreasing spending or changing asset
allocation. Financial plans should also be fluid, with occasional updates when
financial changes occur.
Elements of a Financial Plan
• Financial goals: A financial plan is based on an individual's or a family's clearly
defined financial goals, including funding a college education for the children,
buying a larger home, starting a business, retiring on time or leaving a legacy.
Financial goals should be quantified and set to milestones for tracking.
• Personal net worth statement: A snapshot of assets and liabilities serves as a
benchmark for measuring progress towards financial goals.
• Cash flow analysis: An income and spending plan determines how much can be set
aside for debt repayment, savings and investing each month.
• Retirement strategy: The plan should include a strategy for achieving retirement
independent of other financial priorities. The plan should include a strategy for
accumulating the required retirement capital and its planned lifetime distribution.
• Comprehensive risk management plan: Identify all risk exposures and provide the
necessary coverage to protect the family and its assets against financial loss. The
risk management plan includes a full review of life and disability insurance,
personal liability coverage, property and casualty coverage, and catastrophic
coverage.

3. • Long-term investment plan: Include a customized asset allocation strategy based
on specific investment objectives and a risk profile. This investment plan sets
guidelines for selecting, buying and selling investments and establishing
benchmarks for performance review.
• Tax reduction strategy: Identify ways to minimize taxes on personal income to the
extent permissible by the tax code. The strategy should include identification of tax-
favored investment vehicles that can reduce taxation of investment income.
• Estate plan: Create arrangements for the preservation and distribution of assets
with attention to minimizing settlement costs and taxes. Review and update estate
panning instruments, such as wills, inter-vivos trusts, power of attorney, medical
directives, and marital trusts.
Six Steps in the Financial Planning Process
The following steps make up the financial planning:
1. Establishing and defining the client-planner relationship - The financial planner explains or
documents the services to be provided and defines his or her responsibilities along with
the responsibilities of the client. The planner explains how he or she will be paid and by
whom. The planner and client should agree on how long the relationship will last and on
how decisions will be made.
2. Gathering client data and determining goals and expectations - The financial planner asks
about the client's financial situation, personal and financial goals and attitude about risk.
The planner gathers all necessary documents at this stage before giving advice.
3. Analyzing and evaluating the client's financial status - The financial planner analyzes client
information to assess his or her current situation and determine what must be done to
achieve the client's goals. Depending on the services requested, this assessment could
include analyzing the client's assets, liabilities and cash flow, current insurance coverage,
investments or tax strategies.
4. Developing and presenting the financial planning recommendations and/or alternatives -
The financial planner offers financial planning recommendations that address the client's
goals, based on the information the client provided. The planner reviews the
recommendations with the client to allow the client to make informed decisions. The
planner listens to client concerns and revises recommendations as appropriate.
5. Implementing the financial planning recommendations - The financial planner and client
agree on how recommendations will be carried out. The planner may carry out the
recommendations for the client or serve as a "coach, " coordinating the process with the
Client and other professionals such as attorneys or stockbrokers.
6. Monitoring the financial planning recommendations - The client and financial planner
agree upon who will monitor the client's progress toward goals. If the planner is involved,
he or she should report to the client periodically to review the situation and adjust
recommendations as needed.