Types of Financial Planning in Personal Finance: A Complete Guide for Salaried and Business Owners
Most people think financial planning is about picking the “best” investment or buying a tax-saving product in March. It’s not.
Financial planning is not about products, it’s about clarity.
Over the past 20+ years of working with professionals, business owners, and families across India, I’ve noticed a familiar pattern: people don’t fail at money because they don’t earn enough. They fail because their finances are disconnected — savings in one place, insurance somewhere else, no real goals, no reviews, and no written plan.
If this sounds like you, you’re not alone.
In this guide, I’ll walk you through the six foundational pillars of financial planning, along with overlooked elements like emergency funds, goal setting, review systems, and tools that help simplify the process.
This isn’t a generic blog post. It’s the real-world blueprint I use for my clients at Welfin.
Whether you’re a salaried professional, self-employed, or someone starting late, this guide will help you take control of your finances, not just for today, but for decades to come.
What is Financial Planning? A Planner’s Lens
Most people confuse financial planning with investment advice, but they’re not the same.
Financial planning is a structured, ongoing process to align your money with your life goals. It includes managing your income, spending, savings, investments, taxes, insurance, and legacy (the transfer of your wealth to your loved ones) all within one connected roadmap.
It’s not about picking the highest-return mutual fund. It’s about knowing why you’re investing, how long you need the money to grow, and what risks you can afford to take.
Here’s how I define it after two decades in practice:
“A financial plan is not a document. It’s a living system that evolves as your life does. When done right, it helps you make better decisions, with less stress, and more clarity.”
Why Planning Fails Without Integration
In my experience, even high-income earners often have no true plan. Here’s what I commonly see:
- They have 6 mutual funds, 3 insurance policies, and 0 clarity on what each is for.
- Their emergency fund is their credit card.
- Their investments are not linked to any life goals.
- No one is reviewing their plan every year.
That’s not planning, that’s financial clutter.
You can witness the real value of financial planning when done correctly.
Here is what a well-planned financial plan gives you:
- Helps you understand how much is “enough”
- Aligns your money with your personal values
- Prepares you for both opportunities and emergencies
- Gives your family a roadmap in case something happens to you
- Let’s you sleep better at night
And most importantly, it gives you back control.
Types of Financial Planning: The 6 Pillars That Build Your Financial Life
Financial planning is not a one-size-fits-all formula. It covers different aspects of your financial life, each with a specific purpose. There are six financial planning types that cover every aspect of your life, from growing wealth to transferring wealth to your heirs.
- Cash Flow Planning & Budgeting
- Insurance Planning
- Retirement Planning
- Investment Planning
- Tax Planning
- Estate Planning
The table below clearly explains what each type of financial planning is and what it helps you to achieve:
| Type of Financial Planning | What It Covers | Your Outcome |
| Cash Flow Planning & Budgeting | Track income & expenses, manage cash surplus, control spending | Build financial discipline and fund life goals |
| Insurance Planning | Protect income and assets through life, health, and critical illness coverage | Stay financially secure during emergencies |
| Retirement Planning | Calculate and build your post-retirement income strategy | Retire comfortably without financial anxiety |
| Investment Planning | Choose and manage suitable investment products for your life goals | Grow wealth systematically and beat inflation |
| Tax Planning | Structure finances to reduce tax liability legally | Save more, invest more, and align taxes with your goals |
| Estate Planning | Ensure smooth transfer of wealth to your heirs | Protect your legacy and avoid future legal hassles |
Cash Flow Planning & Budgeting: Your Financial Foundation
Before we talk about investments, taxes, or retirement, we must address one fundamental truth:
“You cannot plan your future if you don’t understand your present cash flow.”
Cash flow planning is the process of tracking what comes in (income), what goes out (expenses), and how much is left to build your future. It’s not about restrictions, it’s about awareness, control, and intentional choices.
Why Cash Flow Planning Matters So Much
Many people assume they save enough. But until they map their cash flows, they’re operating on gut feeling. A few common blind spots I see with clients:
- Treating bonuses or irregular income as a monthly cash flow
- Ignoring one-time expenses like car insurance, family trips, and school fees
- Not differentiating between discretionary and non-discretionary spending
- Having multiple credit cards but no consistent savings pattern
A 2024 survey by Finnovate found that nearly 40% of affluent Indian households do not maintain a sufficient emergency fund, and only 38% are debt-free. This clearly points to a lack of structured budgeting and cash flow visibility, even among higher-income groups.
If your savings and investments fluctuate every month, this section is where you fix the root cause.
The Framework I Use for Clients
A modified 60-20-20 budgeting rule works better in India than the Western 50-30-20 rule:
- 60% Essentials: EMIs, groceries, school fees, rent, bills
- 20% Goals: SIPs, RDs, retirement, vacation fund
- 20% Flex/Emergency: Medical buffer, contingency, guilt-free personal spends
This is more realistic for middle-class and affluent Indian households, which we commonly use in our Welfin financial planning services along with other models, where fixed costs are higher.
For Freelancers & Business Owners
Cash flow planning is even more critical when your income isn’t fixed:
- Work with monthly income averages over 12 months
- Budget your taxes proactively (many forget advance tax deadlines)
- Set up separate accounts for personal and professional expenses
Budgeting Tools That Are Best Suited for Indians
| Type | Tool |
| Manual | Google Sheets, Microsoft Excel |
| App-Based | ET Money, Walnut, Moneyfy |
| Bank-Linked | Jupiter App, Fi App |
One Small Hack: The 3-Account System
I recommend setting up three separate bank accounts:
- Income & Spending Account – where your salary/receipts come in
- Goal Account – where your SIPs/EMIs auto-debit from
- Emergency Account – untouched, grows slowly over time
This setup creates automatic discipline and mental clarity.
Insurance Planning: Protect Before You Grow
One of the biggest financial planning mistakes I see in Indian households is this:
“People start investing before securing their risks.”
Insurance planning is the protective shield around your financial plan. It ensures that one unexpected event like hospitalization, job loss, or death, doesn’t wipe out years of hard work and savings.
What Insurance Planning Really Means
It’s not about owning many policies. It’s about having the right kind of cover, in the right amount, at the right time in your life.
Key areas include:
- Life Insurance: Primarily term insurance for income replacement
- Health Insurance: Individual or family floater with top-ups and riders
- Disability & Critical Illness Cover: Often ignored, yet crucial
- Personal Accident Insurance: Affordable protection that helps significantly
Recommended Coverage Guidelines
Term Life Insurance
Target a cover of 10–15× your annual income, calculated using the Human Life Value (HLV) approach. (tools for HLV calculation given later in the section, keep reading)
Health Insurance
- Minimum base cover: ₹5 lakh per person or ₹15–20 lakh family floater
- Add top-up health plans and cover for OPD/day care procedures
- Avoid health insurance with a copay option
Despite growing awareness, India still significantly lags behind global benchmarks in insurance coverage. According to IRDAI data, insurance penetration in India dropped to 3.7% of GDP in FY 2023–24, down from 4% the previous year. Of this, life insurance accounted for 2.8% and non-life for just 1%. In contrast, the global average stands at around 7%, highlighting the wide protection gap that still exists in Indian households.
Real Client Case: From Underinsured to Protected
One doctor client believed he was well-insured with five traditional policies. Upon review, we:
- Replaced with ₹1.5 crore term insurance (~₹12K/year)
- Added ₹25 lakh health floater + ₹10 lakh top-up
- Added ₹15 lakh accident and ₹10 lakh critical illness plans
Coverage increased 5x while premium dropped by 30%.
Common Mistakes to Avoid
- Mixing insurance with investment (ULIPs, endowment plans)
- Ignoring inflation in health cover
- Not updating nominees after major life events
- Hiding pre-existing health conditions
Recommended Tools & Resources for Insurance Planning
| Need | Tool / Resource |
| Compare Term Plans | PolicyBazaar, Ditto Insurance |
| HLV Calculator | Acko, ICICI calculator for HLV |
| IRDAI Guidelines | irdai.gov.in |
| Health Plan Reviews | Beshak |
Retirement Planning: Secure Your Future While You’re Still Earning
Ask most people when they plan to retire, and they’ll say, “Not now, I’m still earning.” That’s the problem.
“Retirement planning isn’t about when you retire. It’s about how early you start preparing for it.”
Whether you’re in your 30s or 50s, you will one day stop earning actively. The question is: will your money keep working for you?
In my experience, most Indian professionals either:
- Rely too much on EPF/PPF (which won’t be enough)
- Postpone planning until their 40s
- Don’t account for inflation and rising healthcare costs
How Much Do You Really Need to Retire?
Let’s look at a real example:
- Current monthly expense: ₹50,000
- Years to retirement: 20
- Inflation assumed: 7%
Your projected retirement expense = ₹1.93 lakh/month
Corpus required to sustain 25 years of retirement (post-tax) = ₹4.5–₹5 crore
Most people are shocked when they see these numbers for the first time. That’s why early planning is crucial; you’ll need the power of compounding to work in your favor.
Best Retirement Planning Tools in India
| Goal | Tool / Platform |
| NPS planning & corpus calculator | ET money |
| Goal forecasting | Scripbox Planner |
| Portfolio monitoring | INDmoney |
Key Products to Consider for Retirement Planning
- Mutual Fund SIPs – Equity funds for growth, hybrid for stability
- EPF / VPF / PPF – Good debt components, but not growth-heavy
- Annuity plans / SWPs – Create monthly post-retirement income
- Health + top-up insurance – Medical costs will be your biggest risk in retirement
- NPS (Tier 1) – Offers additional tax benefits under Sec 80CCD(1B), making it attractive for those in the old tax regime. It’s mandatory for government employees, while corporate employees can contribute if their employer offers the facility or voluntarily. Note: 60% of the NPS maturity corpus is tax-free, but 40% must be used to purchase an annuity, which is taxable. NPS is a powerful tool when used strategically, but it may not suit everyone.
Investment Planning: Grow Your Wealth with Purpose
Most people invest with one of three mindsets:
- “What gives the highest return?”
- “What’s trending right now?”
- “My friend/agent suggested this.”
But investment planning is not about picking products; it’s about aligning money with specific goals, timelines, and risk capacity.
When done right, it helps you build long-term wealth, beat inflation, and stay financially prepared for life’s milestones; all with confidence, not confusion.
Why Investment Planning Matters
In my experience, even high-income professionals make costly mistakes like:
- Investing in 6–10 random mutual funds with overlapping portfolios
- Keeping too much idle cash in savings accounts
- Going overboard with real estate or gold without liquidity
- Chasing short-term returns without a long-term plan
Without a structured investment strategy, most people stay busy but not wealthy.
How I Approach Investment Planning
Every investment plan we create at Welfin is built on three principles:
- Purpose: What goal is this investment funding?
- Timeline: When will you need the money?
- Risk Comfort: Can you emotionally and financially handle temporary losses?
This helps determine:
- Asset allocation (Equity, Debt, Gold, RE)
- Instrument choice (MFs, ETFs, FDs, bonds, REITs)
- Tax efficiency (capital gains, 80C/80TTB savings)
Popular Investment Options in India
| Category | Examples | Best For |
| Equity | Mutual Funds, Direct Stocks, Index Funds | Long-term wealth creation |
| Debt | FDs, Bonds, Debt Funds, PPF | Capital protection + steady returns |
| Hybrid | Balanced Funds, Dynamic Asset Funds | Moderate-risk, goal-based saving |
| Gold | Gold ETFs, SGBs | Diversification & inflation hedge |
| Alternatives | REITs, PMS, AIFs | HNIs, diversification, income |
Goal-Based Allocation Example
| Goal | Timeline | Suggested Mix |
| Emergency Fund | 0–6 mo | 100% Liquid Funds / Sweep-in FDs |
| Child’s Education (UG) | 5–10 yr | 60% Equity, 30% Debt, 10% Gold |
| Retirement (20+ years) | Long | 75% Equity, 15% Debt, 10% Hybrid |
| House Down Payment | 3–5 yr | 50% Debt, 30% Hybrid, 20% Equity |
Tools that You can Use
| Need | Tool / Platform |
| Direct Mutual Fund Investing | Zerodha Coin, Kuvera |
| Portfolio Tracking | INDmoney, Valueresearch |
| Fund Research | Morningstar, ET Money |
| Goal Planning | Scripbox, ClearTax Planner |
Common Mistakes to Avoid
- Chasing “best mutual fund” lists without a goal
- Over-diversifying (more than 6–8 MF schemes)
- Investing in equity for short-term goals
- Timing the market instead of staying consistent
- Ignoring post-tax returns
Quick Tax Note:
- LTCG on equity (>₹1L in gains, held >1 year) is taxed at 10%
- STCG (sold within 1 year) is taxed at 15%
Always consider post-tax returns, not just headline numbers.
Tax Planning: Optimise, Don’t Just Save
Tax planning in India has shifted. With the new tax regime now the default, salaried individuals often wonder, “Is tax planning even relevant anymore?”
Yes, but the approach is different.
Today, tax planning isn’t just about saving under 80C. It’s about choosing the right tax regime, aligning your finances with your life stage, and making smarter investment decisions that also support tax efficiency.
Old Regime vs New Regime: What You Need to Know
Here is a general comparison of the old tax regime and the new tax regime to help you decide which works best for you.
| Feature | Old Regime | New Regime |
| Deductions allowed (80C, 80D, HRA, etc.) | Yes | No (except NPS employer contribution) |
| Tax Slabs | Higher, fewer slabs | Lower, more granular |
| Rebate (0 tax) | Up to ₹5L income | Up to ₹7L income |
| Standard Deduction | ₹50,000 | ₹50,000 (now allowed in both) |
Key Insight:
- If you don’t claim many deductions, the new regime is simpler and often cheaper.
- If you invest smartly (SIPs, NPS, home loan), the old regime can still save more tax.
What Smart Tax Planning Looks Like in 2025
Here’s what I recommend to clients today:
1. First, Choose the Right Regime
Run the numbers once a year. If you’re salaried and claim:
- ₹1.5L under 80C (ELSS, PPF, EPF)
- ₹50K under 80CCD(1B) (NPS)
- HRA or home loan benefits
…you may save more in the old regime.
If you’re just starting out, not investing much, or want simplicity, the new regime works better.
2. Use Goal-Aligned Tax Deductions
If you’re in the old regime, make your tax-saving investments purposeful. Here is a general overview on how to optimize.
| Section | Smart Option | Benefit |
| 80C | ELSS (3-year lock), PPF, term insurance | Up to ₹1.5L |
| 80D | Health insurance for self + parents | ₹25K–₹75K |
| 80CCD(1B) | NPS Tier 1 | ₹50K extra |
| HRA / Home Loan | Rent receipts, interest on housing loan | Based on actuals |
Don’t buy bad insurance products or random ULIPs just to exhaust 80C. Your tax-saving tool should also serve your investment goal.
For Freelancers & Business Owners
For self-employed, freelancers, and business owners, here is how you can plan-
- Budget for advance tax (due quarterly)
- Track expenses to claim deductions
- Use presumptive taxation if eligible (Sec 44ADA)
- Maintain separate accounts for clarity
Tax planning today is about efficiency, not just exemption. Whether you’re a salaried employee or a business owner:
- Pick the right regime annually
- Align tax savings with goals (not last-minute panic)
- Review your capital gains and deductions regularly
If you want to keep more of what you earn, plan it, don’t postpone it.
Estate & Succession Planning: Secure Your Legacy, Not Just Your Wealth
Most people believe estate planning is only for the ultra-rich. In reality, it’s about one thing: making sure your wealth reaches the right people, in the right way, at the right time; that too without stress, confusion, or legal delays.
“If you’ve built wealth, you must also plan how it will transfer; otherwise, someone else will decide for you.”
Why Estate Planning Matters in India
Even financially savvy families often overlook:
- Missing or outdated nominations in bank accounts and mutual funds
- No written Will, causing years of legal disputes
- Dependents unaware of account details or insurance policies
- Lack of clarity on digital assets (online investments, UPI apps, crypto)
India’s slow probate system and rising family disputes make a basic estate plan essential, regardless of net worth.
Key Components of Estate Planning
- Will: Specifies who inherits what. Even a handwritten Will is valid, but registration adds legal strength.
- Nomination: Provides quick access to assets. Must be updated after major life changes like marriage or divorce.
- Joint Accounts: Ensures smoother transitions. Use “Either or Survivor” formats in key bank or FD accounts.
- Trusts: Useful for minors, dependents with special needs, or large estates. Should be created with legal assistance.
- Power of Attorney: Allows someone to act on your behalf during incapacity. Ideal for elderly or NRI clients with Indian assets.
Common Mistakes to Avoid
- Assuming that nominations override Wills (they don’t)
- Failing to update nominees after life events
- Leaving out digital investment details (trading accounts, UPI apps, subscriptions)
- Not documenting anything in writing, relying on “family understanding”
- Overlooking inherited property documentation
Simple Estate Planning Checklist (2025)
- Write and register a basic Will (it can even be handwritten)
- Add or update nominees across all financial and insurance accounts
- Maintain a consolidated physical + digital record of assets and access information
- Communicate your wishes clearly with your family members
- Create a trust only if necessary (for minors, special cases, or succession planning)
- Review and update the plan every 3–5 years or after major life events
Recommended Tools & Resources for Estate & Succession Planning
| Purpose | Tools/Resources |
| Write a Will online | WillStar, LegalDesk, eSahayak |
| Secure document storage | DigiLocker, Google Drive (with access protocols) |
| Professional drafting (Will/Trust/POA) | Registered estate planner or legal firm |
Estate planning isn’t just for the wealthy; it’s for anyone who wants their loved ones to be protected and their assets to be transferred without friction.
If you’ve worked hard to build your wealth, a few proactive steps today can help your family avoid confusion and conflict tomorrow.
You’ve built wealth with care. Now pass it on with clarity.
Conclusion
Financial planning isn’t just about numbers; it’s about making life’s decisions with clarity and confidence. From managing daily cash flow to planning for retirement, taxes, and wealth transfer, a well-structured financial plan ensures your money works in harmony with your goals. It’s not a one-time activity, but a lifelong process that evolves with you.
At Welfin, we help you simplify that process with expert guidance across all areas of financial planning. Whether you’re starting fresh or looking to strengthen your strategy, we build tailored plans that align with your values and future. Book your free consultation today and let’s build a plan that works for you, not just your money.
