What is the primary purpose of a financial plan?

The primary purpose of a financial plan is to outline financial goals and the steps needed to achieve them. A financial plan serves as a roadmap for individuals or organizations to define their objectives, such as saving for retirement, purchasing a home, or funding education. By establishing clear goals, the financial plan provides a structured approach to assess current financial situations, prioritize needs, and develop actionable strategies for reaching those goals.

This involves evaluating income, expenses, investments, and other financial factors to create a comprehensive strategy. While aspects like calculating monthly expenses, tracking investment performance, or implementing tax-saving strategies are important components of financial management, they are secondary to the overarching goal of setting and achieving specific financial goals. A well-structured financial plan ensures that all these elements work cohesively to support the primary objectives laid out at the beginning.