Financial plan

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In general usage, a financial plan is a comprehensive evaluation of an individual's current and future financial state by using currently known variables to predict future cash flows, asset values and withdrawal plans.[1] This often includes a budget which organizes an individual's finances and sometimes includes a series of steps or specific goals for spending and saving in the future. This plan allocates future income to various types of expenses, such as rent or utilities, and also reserves some income for short-term and long-term savings. A financial plan is sometimes referred to as an investment plan, but in personal finance a financial plan can focus on other specific areas such as risk management, estates, college, or retirement.

Context of Business[edit]

In business, a financial plan can refer to the three primary financial statements (balance sheet, income statement, and cash flow statement) created within a business plan. Financial forecast or financial plan can also refer to an annual projection of income and expenses for a company, division or department.[2] A financial plan can also be an estimation of cash needs and a decision on how to raise the cash, such as through borrowing or issuing additional shares in a company.[3]

While the common usage of the term "financial plan" often refers to a formal and defined series of steps or goals, there is some technical confusion about what the term "financial plan" actually means in the industry. For example, one of the industry's leading professional organizations, the Certified Financial Planner Board of Standards, lacks any definition for the term "financial plan" in its Standards of Professional Conduct publication. This publication outlines the professional financial planner's job, and explains the process of financial planning, but the term "financial plan" never appears in the publication's text.[4]

Issues of Definition[edit]

Textbooks used in colleges offering financial planning-related courses also generally do not define the term 'financial plan'. For example, Sid Mittra, Anandi P. Sahu, and Robert A Crane, authors of Practicing Financial Planning for Professionals[5] do not define what a financial plan is, but merely defer to the Certified Financial Planner Board of Standards' definition of 'financial planning'.

See also[edit]


  1. ^ "Financial Plan Definition". 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. 
  2. ^ Meigs, Walter B. and Robert F. Financial Accounting, 4th ed. (McGraw-Hill Book Company, 1970) pp. 187-188.
  3. ^ Barron's Finance, 4th ed, 2000, p.578.
  4. ^ "Standards Of Professional Conduct". Certified Financial Planner Board of Standards. Rev. January 2010. Retrieved 2011-09-24.
  5. ^ Sid Mittra, Anandi P. Sahu, Robert A Crane. "Practicing Financial Planning for Professionals" (Practitioners' Edition), 10th Edition. (Rochester Hills Publishing, Inc., 2007) sec. 1-3.