Financial planning Meaning: Definition, Examples, and Translations
๐ฐ
financial planning
[fษชหnรฆnสษl หplรฆnษชล ]
Definition
personal finance
Financial planning is the process of setting short-term and long-term financial goals and creating a plan to achieve them. It involves assessing your current financial situation, identifying areas for improvement, and making strategic decisions about saving, investing, and spending.
Synonyms
budgeting, financial management, investment planning.
Which Synonym Should You Choose?
| Word | Description / Examples |
|---|---|
| financial planning |
This term is used when talking about the overall strategy for managing an individual's or organization's financial future. It includes setting goals, analyzing current resources, and creating a plan to achieve financial objectives.
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| financial management |
This term is generally used in a business or organizational context and involves planning, organizing, directing, and controlling financial activities. It is broader and can include both budgeting and financial planning.
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| budgeting |
This term refers to the process of creating a plan to spend your money. It helps to outline where the money will go and ensures that there are resources for necessities, savings, and other financial goals.
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| investment planning |
This term is used when specifically focusing on how to allocate resources in various investment options to achieve particular financial goals. It often involves assessing risk tolerance and setting long-term investment strategies.
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Examples of usage
- Financial planning can help individuals achieve financial security and build wealth over time.
- Many people seek the help of financial planners to create a comprehensive financial plan.
- Effective financial planning requires budgeting, setting financial goals, and monitoring progress regularly.
Translations
To see the translation, please select a language from the options available.
Interesting Facts
Historical Origins
- The term 'financial planning' gained prominence in the 1960s as people started seeking professional advice for managing investments.
- In the early 20th century, investing was mostly limited to the wealthy, but the post-war economy allowed more people to consider financial planning.
- The creation of the Certified Financial Planner (CFP) designation in 1969 helped establish professional standards in the industry.
Economics
- Good financial planning helps individuals prepare for economic downturns, ensuring stability during challenging times.
- It includes budgeting, saving, investing, and retirement planning, which are essential for a personโs long-term financial health.
- Behavioral economics shows that planning can reduce anxiety regarding money and improve overall quality of life.
Technology
- With the rise of apps and online financial tools, many people now have access to plan their finances conveniently from anywhere.
- Robo-advisors use algorithms to assist with investment decisions, making financial planning more accessible to younger generations.
- Blockchain technology is beginning to transform financial planning by offering secure ways to manage transactions and keep records.
Psychology
- Studies show that financial planning can lead to reduced stress and a greater sense of control over oneโs life.
- Setting specific financial goals can create a psychological commitment, making individuals more likely to stick to their budgets.
- Visualization techniques in goal-setting have been found effective in enhancing motivation to achieve financial objectives.
Pop Culture
- Movies often highlight financial expertise, such as in 'The Big Short', which portrays the 2008 financial crisis and its lessons.
- TV shows like 'Shark Tank' enable entrepreneurs to seek financial planning advice from experienced investors.
- Financial surveys and rewards programs have become popular themes in various forms of entertainment, illustrating society's growing interest in finance.
Origin of 'financial planning'
The concept of financial planning dates back to ancient times when civilizations used various methods to manage their finances. However, modern financial planning as a profession emerged in the 20th century with the growth of the financial services industry. Today, financial planning plays a crucial role in helping individuals and businesses achieve their financial goals and secure their financial future.