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2 mins Read | 3 Years Ago

Financial Plan Versus Investment Plan for Working Professionals



As a working professional, you have to deal with a lot of responsibilities. Of all the things, financial and investment planning are the biggest concerns. Quite often, people use the terms interchangeably; however, one should know that they are not the same. Read further to know more.

When you start working, you get busy with your professional life and managing the responsibilities of your family; personal finance may seem to be less critical for you. You need to have a plan that guides you financially. As a young adult, you will receive many investment tips and personal tips from your seniors and parents, but before that you need to know the difference between the two.

Financial Plan Versus Investment Plan

  • A financial plan is a process of attaining life’s goals in a planned way by eliminating the surprises. In contrast, an investment plan is one of the pathways of financial planning, and the plan enables you to meet your financial goals with the available resources.
  • While creating a roadmap for a financial plan, you need to take a holistic view of your overall expenses, income, life insurance, investment and so on. It will help if you also ask questions related to your retirement, your short-term or long-term goals, how much money you will require to reach the goals. Basically, it has a broad framework. In the case of an investment plan, you have to understand the risks involved in equity, debts or other schemes. The investment journey is much shorter.
  • In an investment plan, you have to deal with asset classes and rebalance them as per your goals and risk appetite, so that you can earn maximum returns. On the other hand, financial planning encompasses your debt, risk-related to investments, insurance premiums, liability insurance and more.
  • Unlike investment plans, you cannot make any changes to your financial policy as it is a static document. Once you define the goals, you cannot change them unless there is a significant shift in your financial journey. One must review an investment plan regularly to analyse risks, macro-economic changes, the underperformance of assets, etc. You need to consider investments at least once a year and set a target of reallocating the assets.
  • A single financial plan cannot be replicated for another person. Every individual’s monetary scenario and goals are distinct. An investment plan is more like a template. When you invest in a mutual fund scheme, the fund manager invests money into assets that will help to achieve similar goals for a group of investors.

To conclude, a financial plan only relates to the framework, while the investment plan is a plan of action that forms the core component of the financial planning process. As a working professional, you need to plan for personal and investments separately.

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