10 Reasons You Need A Financial Plan

10 Reasons Why You Need a Financial Plan for a Secure Future

Financial planning is the smartest way to secure your life without exhausting your earnings. It is a roadmap to help you achieve your financial goals.

Written by : Knowledge Center Team

2025-10-24

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10 minutes read

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People in their 20s seldom worry about their finances. As their responsibilities grow, personal finance becomes the centre of focus. At this point, a personal financial plan can help people meet their goals. 

Financial planning meaning, can be explained as an overall evaluation of a person's current income and future situation and considers known variables to predict future asset values, earnings, and possible withdrawal plans.

Such a plan allows you to manage money efficiently and make wise financial decisions. Knowing the details regarding what are the needs of financial planning can yield better results. 

This blog will explain the reasons behind the need for financial planning. Let’s dive deeper into the details.

Key Takeaways

  • A well-structured financial plan allows you to track your income, expenses, and savings, ensuring that your money is being utilised wisely.
  • Diversifying your investments across various instruments like insurance, health plans, ULIPs, PPF, NSS, etc., helps reduce risk and boosts financial growth.
  • Unexpected events like medical emergencies or job loss can be financially draining. An emergency fund ensures you have a financial cushion without relying on loans.
  • Having adequate health and life insurance coverage safeguards your family’s financial security in unforeseen circumstances. 
  • Financial planning is essential when setting clear, achievable goals and ensuring stability for the future.

Why Do You Need a Financial Plan?

As it dawns on you that personal finance management is crucial for a secure life in the future, you may be looking at financial planning tips online. However, it would be much better to focus on building a financial plan for yourself. But is this reason enough for you to start drafting a plan? Well, a secured future is just one of the reasons that you need to have a financial plan?

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A secure future is just one of the reasons for the need for financial planning. Here are ten reasons defining what is the need for financial planning:

  1. Manages Cash Flow: Managing your income is one of the primary aspects that creates the need of financial planning. You should be aware of where you are spending your money. In case all the money from your income is getting extinguished by the month-end, you need to develop a personal finance plan. Lack of a proper budget might lead to several problems in the long run. Precisely, it helps in tracking your money including your savings, expenses, and earnings.

  2. Helps in Managing Debts: Nowadays, people tend to take out loans to fulfil their needs or to make expensive purchases like buying a home, funding education, and buying automobile. These liabilities might turn into debt traps if proper planning is not done. Some people even faced credit card debts. Thus, a financial plan becomes necessary to ensure that one does not end up in a financial crisis. Getting rid of your debts will allow you to focus on other financial targets. As a financial plan helps you track your money, it will also give you room to prioritise your expenses so that you can clear the mountain of debt.

  3. Streamline Investments: Investments should be such that a person gets substantial benefits from them. A scattered method of investment will never be helpful. Sufficient research must be done before narrowing down on what your portfolio should look like. It is advised to have a diverse portfolio to reduce the risks involved with the investment. You should not make investments impulsively. Additionally, it is critical to invest in a life insurance cover.

  4. Improves the Standard of Living: You must have heard a myth that you will have to compromise on your standard of living if you start addressing your EMIs and monthly bills. Well, this is not true. A good personal financial plan will not make you sacrifice your standard of living. On the contrary, it will allow you to live a comfortable life while achieving your financial goals.

  5. Provides Financial Security: Having a financial plan allows you to create an emergency fund. In the case of a health emergency or a loss of a job, you will not worry about procuring funds or getting an immediate loan. The emergency fund will provide financial security and allow you to pay for several expenses on time. Learn more on steps towards a secure financial future of your family.

  6. Build Your Saving Pot: You can save money without a personal financial plan in place. However, it might not be the most efficient way to increase your savings. By creating a financial plan for yourself, you will get a lot of insight into your income sources and areas of expenses. If you approach an expert providing financial planning tips, they will tell you to have savings equivalent to your salary of 6 months. It allows you to be better prepared for financial emergencies.

  7. Right Asset Allocation: You need to understand that not all assets provide the same return on investment. During a stock market rally, equity can be considered a good investment option. In another scenario, when the stock market might not be doing well, assets like real estate and gold can serve as wonderful investment options. Thus, the need for financial planning helps in offering tips for the right asset allocation in multiple instruments. It will help you realise your financial goals without too much risk. The financial plan will devise a strategy to shield you during turbulent times of market volatility. 

  8. Helps in Calculating the Right Insurance Cover: In the case of an unfortunate demise or a health emergency of a family member, the right insurance cover proves to be a boon. The right life insurance cover ensures that your family member can pay off the remaining debts and have a proper standard of living. On the other hand, a health insurance policy ensures that you can treat your loved one in case of a mishap or medical emergency. A financial plan will consider your income and decide the right insurance coverage for you. You can reach out to Canara HSBC Life Insurance for guidance on which policy suits your conditions the best.

  9. Beneficial in Achieving Long-term Goals: A personal financial plan can help you conclude where you want to be after twenty or thirty years. It takes you a step closer to your dreams. It allows you to achieve your financial goals within a specific period. Thus, it is better to start planning early as it will help you save more money and reach your goals earlier. Moreover, early investment will also result in higher returns.

  10. Filters out Unessential Financial Products: One important aspect of financial planning is finding assets that might not be profitable. It might be a share that has no chance of growing. It would be best if you let go of such stressed assets. In other cases, people end up taking several insurance policies, and none of them is serving any purpose to the policyholder. It is merely filling up the pockets of the insurance agents. Thus, you must be wise when selecting your life insurance cover or other insurance policies.
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Did You Know?

About 70% of Indians save in bank deposits, insurance, post office savings, and gold, with over 64% using bank and post office deposits. 

Source: Livemint

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Tips for Successful Financial Planning

Now that you have a clear understanding of financial planning and its needs, let’s examine some of the tips that can help in effective financial planning.

  • Set Healthy Relationships with Finances: It's easy to overlook the impact of seemingly insignificant expenses like travel costs, phone bills, or indulgent snacking habits. However, these expenses can quietly add up over time, potentially affecting your financial stability in the long run. 

Start by meticulously tracking your expenditures to see where your money is going. This will help you understand extra and necessary expenses.

  • Setting SMART Financial Goals: For the effective financial planning, you must ensure you set clear and SMART (Specific, Measurable, Attainable, Relevant, and Timebound) goals. You must also classify your goals into short-term and long term to channelise your income into productive use. Thus, by planning ahead, you make reaching your goals easier and increase the likelihood of successfully attaining them.
  • Save Systematically to Build Your Wealt: To attain financial freedom, it is crucial to stay patient with your savings habits, as wealth building is a gradual process. Investing systematically can help deal with market volatility. It is advisable to stick to your investment plan to achieve your financial goals.
  • Creating an Emergency Fund for Unforeseen Events: Life’s essence lies in its unpredictability. While we cherish the happy moments, being prepared for unforeseen events is equally important. Medical situations, job loss due to injury, or an untimely demise are few instances where emergency funds act as a financial cushion. It ensures that you don’t have to rely on loans or deplete your savings. This ensures peace of mind and financial stability during tough times.
  • Planning for Retirement Security: Retirement planning is about more than just saving for a comfortable and financially independent future. With rising healthcare costs and inflation, having retirement-focused schemes like the National Pension System (NPS), Public Provident Fund (PPF), or ULIPs can secure you a financial backup.
  • Building a Diversified Portfolio: The need for financial planning isn’t just limited to building a corpus but also a diverse portfolio. With knowledge around different schemes, you can smartly invest in multiple areas. For example, while you enjoy the ULIP scheme benefits post lock-in period, the sum can be used along with the tax exemption amount to invest in PPF. 
  • Monitoring and Reviewing Financial Goals: Financial planning requires regular monitoring and adjustment of your investments to stay aligned with your changing economic position and developing needs. Life events such as marriage, having children, career changes, or economic fluctuations can impact your financial goals. Reviewing your plan at least once a year ensures that your savings, investments, and insurance coverage remain relevant.

Maximising the Benefits of Financial Planning

The need for financial planning is crystal clear. It is essential to ensure that you make smart decisions regarding your future. Whether you’re building an emergency fund, planning for retirement, or optimising tax benefits, a well-structured financial plan helps you stay ahead of uncertainties. The key is to regularly assess and adjust your plan to adapt to life’s changing needs and opportunities.

Regularly Reviewing and Adjusting Financial Plans

Financial planning is an ongoing process that needs regular evaluation-based adjustments to keep up with changing life circumstances, economic conditions, and personal goals. A strategy that worked a few years ago may no longer be effective today. Hence, reviewing your financial plan every six months to a year ensures that your savings, investments, and insurance align with your developing needs. 

To Sum It Up

A financial plan helps you take care of your dreams without taking you away from your responsibilities. It ensures financial security for your family without affecting your primary goals. Thus, the need for financial planning arises to make the most of the hard-earned money to meet the financial objectives.

Most of you might not have the expertise to make a financial plan on your own. It will be best to get the advice of an expert on the same. Also, you can invest in Canara HSBC Life Insurance policies to save on taxes and keep your loved ones financially secure.

Glossary:

  1. Equity: Equity represents ownership in a company, typically in the form of shares of stock.
  2. Market Volatility: It refers to the degree of fluctuation in asset prices within a market over a period of time, indicating the level of uncertainty and risk present in the market.
  3. Debt Management: The practice of strategically handling debts to prevent them from becoming overwhelming.
  4. Investment Diversification: It refers to spreading investments across various asset classes to reduce risk and maximise returns.  
  5. Insurance Coverage: It refers to the protection against financial losses that can occur due to unforeseen events such as illness, accidents, or death.
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Disclaimer - This article is issued in the general public interest and meant for general information purposes only. The views expressed in this blog are solely those of the writer and do not necessarily reflect the official policy or position of Canara HSBC Life Insurance Company Limited or any affiliated entity. We make no representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability, suitability, or availability with respect to the blog or the information, products, services, or related graphics contained in the blog for any purpose. Any reliance you place on such information is therefore strictly at your own risk. You should consult with a qualified professional regarding your specific circumstances before taking any action based on the content provided herein.

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FAQs Related to Need a Financial Planning

Yes, a well-crafted financial plan can certainly aid in managing taxes. By strategically organising your finances and utilising tax-efficient investment options, you can potentially minimise your tax burden and maximise your savings. 

Personal financial planning can assist with various aspects of financial well-being beyond taxes. It can help individuals in the following ways:

  • Manage debt 
  • Save for short-term and long-term goals
  • Create a sustainable budget 
  • Build an emergency fund for unexpected expenses
  • Protect assets through insurance
  • Achieve greater financial stability and peace of mind

The need for financial planning depends on numerous factors, including your income, savings, spending habits, investment, and insurance..

To make an effective financial plan, you must define your goal and create a budget while considering debt management strategies, retirement plans, emergency funds, and insurance coverage.

 

Strategic financial planning involves outlining how a business handles its finances to guarantee the attainment of its short-term and long-term goals and objectives.