What is the primary purpose of financial planning?

The primary purpose of financial planning is to set financial goals and develop strategies to achieve them. Financial planning involves assessing an individual's or a family's current financial situation, determining their long-term financial aspirations, and creating a detailed plan to bridge the gap between the two. This process includes evaluating income, expenses, savings, debt management, and investment strategies, ensuring that all aspects work cohesively towards reaching the defined financial goals.

While creating a budget for daily spending, minimizing taxes, and investing in stocks are all important components of financial management, they serve as tools or strategies within the broader framework of financial planning. Effective financial planning incorporates these elements but is fundamentally centered on the goal-setting aspect which lays the foundation for all subsequent financial decisions and actions.