To over simplify, financial planning is how you manage your finances and establish a path to reaching your goals.  Investment management is one part of managing your finances.  It is the part that determines how your savings will be invested.

Financial planning starts with your goals.  The amount and timing are critical.  Prioritizing your financial goals is necessary.   You can assign a priority of 1 to 10 or categorize your goals by what is needed, what is wanted and what is wished for.  This will be essential as you monitor your progress.  Life and unanticipated events are not controllable and may require adjustments.  Adjustments may result in changes to your goals, the timing of your goals, or your spending.

A reserve fund is needed to absorb unexpected events.   Reserves should be held so that they are quickly assessable, that is, liquid.   Six months of reserve are generally recommended.   As you approach each goal, the reserve fund should be increased.  This will avoid the impact of fluctuating investment values when the funds are needed.   The amount of liquid assets should be increased as you near retirement.  This minimizes the need to sell investments when the market is depressed.  Two years of liquid funds are generally recommended for retirees.  A portion of the funds for living expenses in retirement might be held in short-term bond funds or bonds.

Investments are purchased with the amount of your savings that exceed your reserves.  The amount that is used for investments must be sufficient to reach your goals.  Education expenses and health care are two categories of expenses that have exceeded what people anticipated.  Many people underestimate the amount they will need in retirement.  Because life expectancy has increased and people have retired early, many people will not be able meet their retirement goals.

The planning process needs to consider the above events and your ability to withstand losses.

The above has touched on cash planning, investment planning, education planning, risk assessment and retirement planning.  All the planning areas need to fit together.  How you manage your investments is dependent on the other areas of your financial plan.
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