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Financial Planning Tools and Techniques

Every financial advisor uses a variety of tools and techniques to help serve their clients. The financial planning industry is wide and varied, offering resources for almost every need you can imagine.

No matter how much financial planning experience you have to date, chances are good that there is room for improvement in your own practice. These days, practicing effective financial planning is more important than ever. It is crucial for helping you to achieve your goals and live the life you want. Today’s financial situation calls for some radical change on the part of the individual planner. The first step towards setting up a business plan is becoming familiar with some basic financial planning tools.

Financial planning tools are useful in overcoming the problems that occur in financial planning. These tools are vital in providing solutions to various fiscal problems. The use of financial planning tools leads to successful investment decisions.

Financial planning tools help you to prepare for your retirement. It can be tricky because it involves money. I’ve made this guide to give you an overview of what financial planning tools are available to use.

Why is Financial planning important?

1. Financial planning ensured the adequacy of funds.
2. Financial planning helps in maintaining stability through a reasonable balance between outflow and inflow of funds.
3. Financial planning ensures the support of investors in the provision of funds due to the presence of sound financial and investment policies.
4. Financial planning helps in prioritizing expansion programs for the long-run survival of the company.
5. Financial planning reduces uncertainties brought by the changing market trends which can be faced easily through the establishment of enough funds.
6. Financial planning helps to avoid hindrances to the growth of the company by considering the capital requirements both for short-term and future plans.

In the article, we consider a number of financial planning tools and concepts

Wealth-Growing Tools 

The wealth-growing financial planning tools are those that help you grow and compound the value of your money over time.  As such, these tools are best suited to meet financial goals that require big cash outlays such as buying a car, buying a house, preparing for your wedding, or preparing for retirement.

Examples of these wealth-growing financial tools are:

To make your money grow meaningfully over the years and to understand better these wealth-growing tools, you need to consider the relationship between two major variables in investing: RISK and RETURN.  

These two variables have an INVERSE relationship.  Simply put: the higher the risk, the higher the potential returns; the lower the risk, the lower the potential returns.  

So if your objective is to achieve higher rates of return for your money over time, you should be ready to take risks with your money – meaning that you should be able to take the periodic loss of capital.  Stocks, stock or equity-based VUL life insurance, and stock-based mutual funds are some of the wealth-growing tools that exhibit relatively higher risks.

On the other hand, if you are not ready to take on risks with your money, you should put them in lower risk tools like bonds, bond-based VUL life insurance, or a bank account.

Protection Tools

The Protection tools of financial planning are those whose main objectives are to serve as a robust cushion of support to you and your family’s financial state should death, devastation, accident, illness, or disability happen to the person who brings in the money and income for the family.  

These protection tools provide either a lump sum or partial cash infusion to you or your family in the event of the occurrence of one or all of those circumstances.

Since major disruptive events are largely unpredictable, it is wise to use these protection tools in conjunction with the wealth-growing tools mentioned above for a truly comprehensive financial plan to work well for you.

Examples of these protection tools include: 

Financial Statements

Financial statements contain information about the company’s assets, liabilities, profits, and losses, making them conventional financial tools for business. Understanding and preparing accurate financial statements is important to the success of a small business. The two most important types of financial statements are the balance sheet and the income statement.

The balance sheet lists assets, liabilities, and equity. The income statement lists revenues and expenses. Revenues minus expenses equal net income. Analyzing the relationship between the balance sheet and the income statement can pinpoint strengths, weaknesses, and opportunities. Financial statements also help business owners prepare tax returns and loan applications.

Budget and Cost Projection

One key tool for financial planning is to prepare a budget and project costs. To prepare a budget, you need to formulate a reasonable sales projection, factoring in peak and off-seasons. The budget will determine how much cash is available to the business. New businesses will include funding obtained through personal financing, bank loans, investments, and other sources. Once a money forecast is available, business owners can look at the different categories of expenses and determine how much to spend in each category, according to Indeed. Most budgets are works in progress and are continually revised.

Cash Flow Statement

A cash flow statement can help you determine your money situation, whether it’s positive or negative. The cash flow statement reveals how much money came in and went out for an entire period of time—say, a month or even an entire year. You can track these numbers using a simple spreadsheet application like Excel or Google Sheets (or any other number-crunching software).

When you add up all the positive numbers on your cash flow statement, they should equal more than zero; otherwise, there wouldn’t be enough income to pay all your bills! Conversely, when you add up all the negative numbers on your cash flow statement, they should equal less than zero; otherwise, there would be more funds available than needed at any given point in time!

Mortgage Calculator

You can use the Mortgage Calculator to calculate the monthly payments on your mortgage. By entering all of the information it needs, you’ll be able to figure out how much money you need to pay out every month, and how much interest you’re going to be paying over time.

To get started with using this tool:

  • Set up your input fields by filling in any missing information. If there’s nothing in a field, click on it so that it becomes highlighted and then enter your value there (for example “5” if your first payment is due in six months). You can also change any numbers already entered that don’t seem right for your situation (such as increasing or decreasing them).
  • Click “Calculate.” This will bring up an output section with lots of useful information about what’s going on with your loan!

Retirement Planner

Retirement planning is a long-term process that begins in your 20s or 30s, when you first start working. Retirement planning involves setting aside money for your retirement and making sure it will last through the years. It also includes building an emergency fund, paying off debt, and contributing to a 401(k) plan at work or an IRA if you’re self-employed.

Your retirement can seem far away now, but if you put these tools and techniques into practice now, they’ll help ensure that you have enough money for when it’s time to retire.

Return On Investment Calculator

A return on investment (ROI) calculator is a tool that allows you to calculate the return on an investment, such as stocks, bonds or mutual funds. It’s useful for figuring out if an investment is worth it, and can help you decide how much to invest in a particular company or market.

For example, let’s say your friend wants to start buying up shares of Apple stock. You know nothing about investing, but want to be helpful so he asks for your advice. He tells you that he has $10k he wants to put into the stock market and asks what would be the best way for him to invest his money.

You pull out your smartphone with its built-in ROI calculator app installed and punch in some numbers: 10k invested at $1k per share equals 100 shares of Apple stock—and then press “calculate”! After just a few seconds of whirring away behind-the-scenes calculations (which could take hours depending on how large these numbers are), your phone returns with its verdict: A potential annualized return of 11%. Impressed by this figure (and no doubt wanting those juicy profits), your friend decides not only will he keep his money safe in the market…but also add another 10k dollars worth of shares!

Compound Interest Calculator

Compound interest is the amount of money you make on your invested money. It’s how much you’ll earn as a result of interest paid on interest. Compound interest can be very powerful when used correctly, but it can also be dangerous if you don’t have a plan for using it to your advantage.

For example, imagine that you decide to put $100 into an online savings account at the start of every year for 10 years. At the end of those 10 years, if you had only put in $100 each year (without any additional deposits), then your total balance would be $1,000—not too bad! But if instead of just putting in $100 each year without making any additional deposits…your friend tells them about compound interest and they decide that instead of putting in just one percent more than last year…they’re going to invest their entire paycheck every month into this account until they reach their goal..and then once they get there keep doing it so they can see where their money goes over time…and guess what? If we take out all those extra deposits (which we call “extra” because technically they shouldn’t affect our results but do) our friend ends up with an extra $876 at the end due entirely because our friend knew how important having a plan was when investing money!

Net Worth Calculator

Once you know how to use a net worth calculator, the next step is to find one that fits your needs. If you’re just getting started with financial planning, a basic net worth calculator will provide the most benefit.

A good net worth calculator should be easy to use and have features like:

  • Quickly calculate your current Net Worth
  • Alerts when you’ve entered incorrect data (like negative cash flows)

Inflation Calculator

The inflation calculator is a tool that can show you the effect of inflation over time. This can be used to help determine the cost of living adjustments, or it may be used to determine how much you need to save for retirement. The calculator also shows how much an investment will be worth over time.

The inflation calculator is useful because it allows you to enter a dollar amount and see how much purchasing power that same amount will have in future years as prices continue to rise over time due to inflation. For example, if today’s rent costs $1,000 per month and there are no changes made between now and then (no increase), then next year that same amount will only buy slightly less than what it did this year: $1,000 would only buy about 97% of what it could this year because prices increased 1%.

Stock Profit Calculator

  • Stock Profit Calculator
  • Return on Investment Calculator
  • Payoff Time Calculator
  • Interest Rate Calculator
  • Inflation Rate Calculator
  • Cost of Living Index Calculator

Break-Even Analysis

A break-even analysis is an essential tool for financial planning. It predicts what gross sales volume the business must achieve to cover its expenses, says Corporate Finance Institute. All sales beyond this point are profits. For new businesses, owners should assess their early predictions and determine how accurate they were. Adjustments might be needed for the next financial period. Mature businesses benefit from this tool as well because they can check their current break-even point and look for ways to lower it and increase profits.

Business Plan

A solid business plan is the first tool that should be used in financial planning: It is the quintessential financial planning tool example. Business plans list every critical aspect of a company. The plan begins with a short overview of the entire plan and a history of the company. The second part of the plan analyzes the market. It provides an industry description, identifies the target market and all strengths, weaknesses, threats, and opportunities.

The remaining areas of the business plan describe the company and how it will be managed. They include information regarding marketing strategies, what products or services are offered, and how the company’s expenses will be financed.


Even if you are a beginner in investment and financial planning, it makes sense to hire an expert advisor to help with your most important monetary decisions.

However, hiring financial advisors can sometimes burn a hole in your pocket. If you cannot afford to hire an expert, you must concentrate on building wealth first. Hiring an expert in the hopes of building wealth someday is counter-productive.

Luckily, for those who either cannot afford a financial advisor or those who can but still prefer to do it themselves, there are many tools available to help you plan your finances and investments all by yourself.

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