FinanceHow to channelized your financial goals during good and bad times?

How to channelized your financial goals during good and bad times?

“To Every Action, there is an Equal and Opposite Reaction.” This is a very famous Law by a very brilliant and well-known Scientist. Here if we see these words in term of finance than if we have income, then only we can spend or invest. Or for Spending or Investment, we need revenue. And the base of any financial activity in our life is our income, and after retirement, the wealth we created by investment is the only source of our income. So, proper planning of wealth creation is very, very important.

Our income defines our lifestyle, our spending, our investment, liberty of our thought process (e.g., if we have good income we take fast decisions on financial matters without compromise. But if we have average salary than still, we can live but with several binding on financial choices).

Although income amount is a very subjective matter very important and likewise expenditure and investment is also an individual matter. But there is a common structure under which we have to align all of them for the proper and smooth running of our life with earning now and after retirement.

For that, we have to understand the term Financial Planning Pyramid. Let’s go and crack it……

What is Financial Planning Pyramid?

There are a few facts about our life which we can’t ignore, or we can’t run away from them. These are the main hindrance factor between our investment and wealth creation.

Few of them are:

  • Shortage of funds for investment or fear of being jobless.
  •  Death is the ultimate truth, and we can’t ignore it. And what happens if the single earning person dies.
  • Health problem of ours and our family members.
  • Different uncertainties in day to day life. (Today corona Pandemic) and in future maybe some other thing.

These are the few leakages between our income and investment for wealth creation, which we are ignoring knowingly or unaware of those things factors. And which pull us back and not let us to reach or divert us from our financial targets or may cause a delay in reaching our financial goals.

These are the few essential bitter truth which moves around us, and we don’t have an answer for all these uncertainties.

So, we have to get ready to face this situation and prepare yourself prepared to answer to all these questions. But this preparation is not possible in a single day. You just waked up in the morning and decided during breakfast that from today I will do my preparation for getting ready to face these uncertainty situations. No, not possible. We need to have a proper step-wise plan and have to align our plan.

Now here come into the picture the term Financial Planning. And the systematic, structured procedure followed stepwise is known as the Financial Planning Pyramid. Also, read the 13 Reasons Why You Should Invest in the Share Market.

Let’s go and see what the steps are or how many levels are there in Financial Planning Pyramid.

How many levels are there in Financial Planning Pyramid?

There are in all the 5 levels in the Financial Planning Pyramid:

1. Financial Planning Pyramid Level 1

    1. Target – Income Safety
    2. Action – Multi-Source Income:

This is the first and the base or the foundation of Financial Planning Pyramid and it needs to be very solid and stable. If income or earning source totally failed then the whole Pyramid will collapse.

But now a day’s competition is more and earning are getting diminishing and expenditure burden are increasing. And in addition to this, there is no security and surety of jobs. Hence looking at the present scenario, we should learn and develop and go for multi-source for income or earning.

2. Financial Planning Pyramid Level 2

    1. Target – Long Term Safety (for our Family)
    2. Action – Term Plan:

This is the second phase of the Pyramid structure and is not for you but for your family safety. As we are aware that we are the only income-generating person of your family and no other source available for income without you. And just for a movement think if unfortunately, something happens with us and we are no more. Sorry, but no one’s family should have to face such a situation. In this situation what our family will do. How will they survive further life? So it is our responsibility to make arrangement for their livelihood when we are here and also when we are not here.

I don’t want to elaborate on this ugly situation furthermore, you are very well aware of all these things what you have seen in others life in front of you.

My intention is not to make you afraid but make you aware of such mishaps of life. For this, the income-generating person should have a sufficient amount of life insurance ie Term Plan.

But the question is that “How much amount life insurance should we have?”

As a thumb rule, the insurance amount should generate income equivalent to today’s family expenditure/month. If the present family expenditure amount is Rs 50000 / month. Then Term plan of income-generating person should be such that if the total amount deposited in the bank and the interest earned from the bank on this total deposited amount in saving a/c is at least Rs 50000 / month. It is a very clear rule. So that no family member will have to work or raise a hand in front of any other person and at least they can live their life comfortably further.

3. Financial Planning Pyramid Level 3

    1. Target – Short Term Safety
    2. Action – Health Plan:

This is the third phase of the pyramid and it also makes major leakage in our journey of wealth creation. Life is totally full of several ups and downs and problems, and now making us prone to new types of different diseases. And if by chance we get attacked by anyone of such disease then, we have started moving out money from our accumulated wealth which causes huge huge leakage in our wealth creation plan. And we get diverted from our path of wealth creation because we have faced a bad situation now and we forgot or we keep one side our future target of wealth creation. But we have to tackle such situation smartly.

We should have to be ready by taking family floater Health insurances for such situation. In which this type of medical emergencies are taken care of by the Health insurance plan and our wealth creation journey will continue without any brake.

4. Financial Planning Pyramid Level 4

    1. Target – Uncertainty Situations
    2. Action – Emergency Fund:

This is forth phase of the pyramid and this situation come in our day to day life now and then. Like today when I am writing on this topic, we are facing as a worldwide pandemic – corona. Now the total country is under lock-down and several have lost their jobs. But as an when situation change all of them will get job back and life is back on track. But for this moment now we should have some amount kept safely as contingency backup or an emergency fund for at least the next 6 months as per our monthly expenditure. Otherwise, our total life and investment structure get disturbed. And we will lose our momentum of wealth creation.

5. Financial Planning Pyramid Level 5

    1. Target – Wealth Accumulation
    2. Action – Investment:

This is the fifth and the last phase or the topmost phase of the pyramid, here we think about Wealth Creation. Till now we have worked on previous 4 levels to protect this 5 level. we should go for this stage or level only if we have fully covered the previous 4 phases of the pyramid. Now we can go for wealth creation by investing in different investment instruments like Equity, Mutual Funds, PPF, Bonds, Gold etc as per our targeted planned return and our risk-taking ability.

So far you have undergone all the 5 levels of Financial Planning Pyramid and got a clear cut idea how to go for wealth creation journey form income to investment stepwise.

But now question is that why this stepwise process is important.

What is the importance of Financial Planning Pyramid?

As you have seen in our above discussion that for the investment we need money and money is generated by our income source (job/business etc). If we go directly for investment without planning of pothole in the way of successful investment and returns, then we will not get desired return or result because surely we will going to get trapped in any of that 4 bottom level problem of the pyramid.

  • Income safety
  • Long term safety
  • Short term safety
  • Uncertainty

To understand and work out on these levels of Financial Planning Pyramid on priority basis one by one in a systematic way to avoid trapping in a pothole and to achieve the desired result, it is important to follow the Financial Planning Pyramid steps and make proper arrangement of them. So, if we have to face such a situation than we are already planned for that problem in advance and will continue of wealth creation journey.


Wealth creation is a must for everyone now a day. As incomes are limited and Goals, as well as Responsibilities, are more. Wealth creation helps us to achieve our targeted goals. But wealth creation goal itself is not possible without a proper systematic approach to avoid leakages and hindrances in a way of wealth creation. And the Financial Planning Pyramid does this part for us by properly guiding us on what to do first and then next and then next. And cover the entire pothole in why of our investment and return.

So, Friend hopes you have enjoyed this article. Good Bye and All the Best!

Disclaimer: This article is only for knowledge and information sharing and not for any type of promotion or recommendation of plan or company.

Jitendra Ajit
Jitendra Ajit
I am Jitendra Ajit, by Profession Mechanical Engineer, Work for India's most reputed HCV / LCV OEM. Passionate for Stock market and Automobile. I am a blogger and Author of 3 books on Stock Market & Personal Finance Management.

Latest Updates