What is financial planning?

Financial planning is a forward-looking process that involves creating a model based on a business's or individual's financial situation, including incoming and outgoing financial flows. It helps in determining cash out dates and understanding the financial dynamics of a business or personal finances. This process usually includes creating profit and loss statements and may extend to more complex documents like balance sheets and cash flow statements as one's business or investments grow 1.

Additionally, financial planning is not just about quantitative financial management but also involves qualitative aspects like understanding one's goals and how financial decisions align with these goals. It requires a consideration of various financial components such as investment and liability statements, income and expenses, insurance details, employee benefits, tax returns, and estate documents. This holistic view helps individuals or businesses make well-informed decisions 2.