What is the purpose of a financial plan?

A financial plan serves to outline the necessary steps to achieve an individual's financial goals. It is a comprehensive strategy that assesses a person’s current financial situation and sets forth actionable measures to reach desired outcomes, such as saving for retirement, purchasing a home, or funding education.

By providing a clear roadmap, a financial plan helps individuals understand their income, expenses, assets, and liabilities while identifying what adjustments or strategies are needed to improve their financial well-being. This proactive approach encourages disciplined saving and investment practices aligned with long-term objectives, thereby promoting financial security and stability.

While other options may touch on aspects of finance, they do not encapsulate the holistic nature and purpose of a financial plan as effectively. Speculating on stock market gains or recommending specific investment products may form part of the investment strategy within a financial plan, but they do not define the overall purpose. Evaluating past performance is useful for assessment but is not the primary aim of creating a comprehensive financial plan.