When income from various resources like salary, interest income or rent from a house property, exceeds a person's expenses, the balance money is the saving. In simple terms, your income inflow is greater than your outflow. Savings are imperitive as they insure your financial stability in the future. It is also the first step in the overall financial planning process. Savings are imperative as they ensure your financial stability in the future. However, saving smartly is not investing smartly.

Investments
If your income is Rs. 40,000 per month and your expenses are Rs. 30,000, then the remaining amount of Rs.10,000 becomes your savings, which you can then invest to gain profits. Investments consists of putting the money into different areas and assets so that it generates a rate of return that is better than what it would earn if it was lying idle. From the example above, the amount of Rs.10,000 could be invested into something as simple as fixed deposit or it could be invested in equities, mutual funds, gold or any other Investment avenues with proper financial planning.

Conclusion: Savings only help initiate investments, however investments give an opportunity to grow your money/ savings.

Now that you have learnt the difference between savings and investments, it is important that you device a smart financial plan. Whatever you want in the future - a secured retirement, holiday, car, home or business - only good financial planning will get you there.

Financial planning helps you determine your short and long-term financial goals and create a balanced plan to meet those goals. Its helps to:-

1. Manage Income:

To manage income more efficiently. The cash and need analysis and income expenditure budgeting will show the best way possible in managing income. Regardless of the amount of income earned, part of the earning will go for tax payment, expenditure and what's left would be the saving. Thus, proper management of income is necessary in increasing cash flow.

2. Manage Cash flow:

Money, if not available when required is said to be of no use. Many of us will have one cash inflow (eg; salary for a salaried person) and multiple cash out flows (eg; expenses like grocery, bills, fees etc). One needs to manage their cash flow well so as to lead a happy today and also maintain a happy tomorrow for themselves and their loved ones. Appropriate Financial Planning would help one to manage cash-flows in accordance to their today’s needs and tomorrow’s responsibilities/ financial dreams.

3. Build Wealth:

To secure one’s financial future, one needs to build wealth and also protect the same. However, one needs to understand that earning/making money is not not equivalent to building capital. Everybody wants to build wealth, however very few understand and follow the discipline required to build the same. Building wealth requires a systematic approach which is key part of financial planning.

4. Identify Investment opportunities:

To identify investment opportunities relevant to your financial situation. Financial planning can help in evaluating the best investment opportunities. A good investment planning has the potential of turning goals from dreams into realities. Apart from picking the ‘right’ investment, it shows how to allocate money among different type of investment. This can have a greater effect on investment success.

5. Gives Financial understanding:

To get a whole new approach to budgeting and gain control over your financial lifestyle, one can evaluate the level of risk in an investment portfolio or adjust a retirement plan due to changing family circumstances for example. It becomes obvious that financial understanding has been attained when measurable financial goals are set, the effect of each financial decision is understood, the financial situation is periodically evaluated, financial planning is done as soon as possible with realistic expectations and ultimately when one realizes that only he or she is fully in charge of it.

6. Maintains Standard of living

One can maintain your family's present standard of living by maximizing the household insurance portfolio. One can create a personal and family financial plan so that there are clearly defined goals or targets and there is enough savings to get there. For example, one can make sure that there is enough disability coverage to replace any lost income. This can ensure that the family remains financially secure if the head of the family or the bread winner dies. Thus, the family's standard of living doesn't suffer and is maintained.

7. Protect the future of your loved ones:

Proper planning and disciplined investments help us build the financial future. However, one needs to also take care of those financial responsibilities of our loved ones even in case of an eventuality. This can be done by insuring one self and also the assets one has built. Thus, Insurance is of utmost importance in an individual’s personal finance.