PUBLIC FINANCE:

FINANCIAL
PLANNING
FINANCIAL PLANNING

WHAT IS FINANCIAL PLANNING?

Financial planning is the process of taking a comprehensive look at your financial

situation and building a specific financial plan to reach your goals. As a result, financial
planning often delves into multiple areas of finance, including investing, taxes, savings,
retirement, your estate, insurance and more. As you might expect, a financial planner
typically offers financial planning services, though financial advisors often double as
planners themselves.

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 FINANCIAL PLANNING

 Financial planning utilizes LG policy and incentives to stimulate growth and

economic activity in a community
 Financial planning comprises –
• Strategic planning
• Budgeting
• Financial Projecting
• Economic development strategies

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BASIC FINANCIAL PLANNING TOOLS

Strategic Capital Trend Economic

Planning Investment Monitoring Development
Planning Strategies

Budgeting Debt Financial

Planning Forecasting

Financial Planning means different things to different people Financial

Forecasting does not exist in vacuum

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BUDGETING
◦ Public policy process of allocating scarce resources to achieve a desired result 
◦ Annual budget allocates revenue to service provision and maintenance 
◦ In the annual budget, the financial forecasting process includes:
• A projection of the current year’s revenues and expenditures to the end of the fiscal year on
which the next year’s budget is based.
• An estimate of the next year’s proposed revenues which should include a listing of all
current and proposed revenue sources, prior years’ actual revenue collections experience,
and the underlying assumptions on which the revenue estimate is based.
• An estimate of next year’s proposed expenditures by central government accounting
classification, department, program or other activity.
• A listing of prior years’ actual expenditures.
• And an explanation of the events or conditions that require changes in operations to
comply with changes in law to initiate new levels of service or to adjust operations to
ensure financial stability or solvency.

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CAPITAL INVESTMENT PLAN

◦ Financial forecasting should be linked to the capital investment program (CIP) 

◦ Multiyear capital investment plan for short/ long term community development 

◦ LGs should develop a multi-year capital investment plan for investments and establish project
priorities for funding subsequent years 

◦ Operating budget planning can then rely on these plans for each subsequent investment
increment 

◦ Identifying the future operating costs of newly constructed facilities

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DEBT PLANNING

◦ Determines type and optimum debt needed to finance CIP 

◦ Typically, there are two components of debt planning: existing debt service (principal
and interest payments) based on credit financing that has been incurred and is being
paid off over a specified maturity period; and future debt service 

◦ The most important assumption, in addition to the size, date of issuance, maturity
date and structure of the debt, is the overall interest rate that will be incurred for the
new debt.

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TREND MONITORING
◦ Uses economic and financial indicators to monitor financial condition 
◦ Various statistics are used and could include:
• Tax base
 Value of real estate per capita
 Number and value of building permits
 Population
 Income tax collections per capita
 Bank deposits
 Collections from largest taxpayers as a percent of total taxes
• Debt Structure
 Debt per capita
 Debt as a percent of LG assets
 Debt service as a percent of total revenues or total annual budget
• Operations
 Total revenues and largest revenue sources
 Property tax collection rates
 Expenditures per capital
 Cash balances/liquidity
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STRATEGIC PLANNING

◦ Systematic process of community anticipating and planning for financial goals


◦ It is a technique that is based on organizational analysis, environmental analysis, and attempts to
identify internal and external factors that will shape an organization’s future.

◦ Once certain future conditions are identified, planners develop a vision statement, mission, goals,
objectives, and strategies to influence and change the organization 5 to 10 years in the future. 

◦ Once adopted, the strategic plan can serve as a blueprint for changes to operations and the need
for a different mix or use of resources to achieve LG goals.

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PURPOSE OF FINANCIAL PLANNING

◦ The main purpose of financial planning is to project resource requirements for specific time
periods and to identify the likely sources of the funds needed.

◦ It helps to keep track of income, expenses, and investments.

◦ Achieving Financial Goals

◦ Preparation for Emergencies

◦ Improved Financial Understanding

https://www.canarahsbclife.com/blog/financial-planning/what-are-the-benefits-of-financial-planning.html
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TYPES OF FINANCIAL PLANNING

Short-Term Medium-Term  Long-Term

 Short Term   
 Medium Term  Number
0-1 year 1-5 years 10+ years
of years
 Long Term

Use • Operating budget • Budgeting • Strategic planning

• Cash management • Policy analysis • Physical and
economic
• Monitor budget • Fiscal impact of development
implementation legislation planning
• Identify financial • Fiscal impact
trends analysis
• Capital investment
programming

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