7 Key Steps of the Financial Planning Process (2024)

Financial planning isn’t only a one-time process in which you make a savings plan and then sit back and wait to achieve your goals.

Comprehensive, long-term financial planning does involve establishing a preliminary plan, but it is important to understand that financial circumstances, challenges, and priorities may change over time. As you approach the financial planning process, it’s essential to remember that the process of setting goals and laying out a blueprint for saving and investing is just the first step in a larger financial journey—one that can help you realize all of your goals and enjoy financial security both now and in the years to come.

Wondering what that process looks like? Here are seven key steps to include in your financial planning.

1. Define your short- and long-term goals.

Financial planning is always based around the financial goals you want to achieve. Though these goals may change over time, it’s important to establish some preliminary goals to help guide your saving strategy.

Ask yourself the following questions: What do you want your financial future to look like? What short-term goals—such as saving for college, purchasing a car, or buying a home—are you pursuing? What goals seem easier to achieve, and which ones seem like a stretch?

2. Audit your current income, savings, and long-term savings and investing plan.

Once you have goals in place, you need to assess your ability to reach them based on your current cash flow. How much are you earning every month and year? How much are you saving? If you haven’t set a budget, now is the perfect time to start tracking your spending by category and increasing your own awareness of your spending habits.

To reach your financial goals—especially long-term goals like building up retirement income—you need to focus on meeting monthly savings and investment goals. You should also account for your current financial stability, such as your emergency fund and/or outstanding debt—especially high-interest debt.

7 Key Steps of the Financial Planning Process (1)

3. Address shortfalls/adjust goals.

Once you’ve assessed your current income, spending, and savings, you may need to adjust your plan and/or your spending to make the math work in your financial planning.

If you’re facing a shortfall, you may need to delay a house purchase or move back your target retirement age. Alternatively, you may want to scale back your monthly spending, or even take on a second job, to help you reach those long-term goals.

4. Account for multiple future scenarios.

A good financial plan is flexible and can be adapted as new challenges and scenarios arise. From unforeseen expenses to new financial goals—such as increased travel during retirement—your financial plan should offer you some insight into how those changes would affect your outlook and your current savings plan.

As you move forward in pursuing your financial goals, are you well positioned to withstand unexpected expenses and other financial challenges? How easily can you reallocate your savings and investments to account for new financial needs?

7 Key Steps of the Financial Planning Process (2)

5. Develop a comprehensive financial plan.

Once you’re satisfied with your goals and your ability to meet them through saving and investing, it’s time to develop a solid plan for how you will make progress from month to month. This includes mapping out timelines for when you will reach certain goals, such as saving for a down payment.

You will also need to use calculators to make sure your plan will be sufficient to reach important benchmarks and long-term goals, such as adequately funding your retirement based on your target retirement age.

6. Implement and monitor that plan.

After a financial plan is set, it’s time to follow through with that plan and make the changes necessary to reach those goals. Track your progress on a monthly and annual basis to avoid falling behind, and track investment earnings and interest dividends to make sure you’re on pace to meet or beat your projected timeline.

7. Adjust goals or other financial plans as your circumstances change.

If your goals change, or new challenges crop up that make it difficult to meet the demands of your existing financial plan, a new approach may be required. Financial planning can always be affected by a loss of income, a big promotion, new additions to your family, failed investments, medical emergencies or disabilities, or even your own personal reassessment of what matters most to you.

As your circumstances and priorities change, you will need to adapt your financial plan accordingly—and, in some cases, these changes will be motivated by increased saving and investing power that lets you accelerate your progress toward savings goals.

Looking for help as you work toward these financial goals? Download A Complete Guide To Budgeting today.

7 Key Steps of the Financial Planning Process (3)

Stay connected

7 Key Steps of the Financial Planning Process (2024)

FAQs

7 Key Steps of the Financial Planning Process? ›

It is crucial to help you manage your cash flow, increase savings, and make good investments. This way, you can achieve financial freedom and grow your business. Seven key components make up a good financial plan. They include budgeting, debt management, insurance, investment, emergency funds, and estate planning.

What are the 7 steps in the financial planning process? ›

Financial Planning Steps – From Start To Finish
  • Establish Clear Goals. ...
  • Gather and Organize Financial Information. ...
  • Analyzing Your Current Financial Situation. ...
  • Develop a Comprehensive Financial Plan. ...
  • Put Your Financial Plan into Action. ...
  • Monitor Your Progress and Make Adjustments. ...
  • Revise and Update Your Financial Plan Over Time.

What are the 7 key components of financial planning? ›

A good financial plan contains seven key components:
  • Budgeting and taxes.
  • Managing liquidity, or ready access to cash.
  • Financing large purchases.
  • Managing your risk.
  • Investing your money.
  • Planning for retirement and the transfer of your wealth.
  • Communication and record keeping.

What are the key stages of financial planning? ›

Financial Planning Process
  • 1) Identify your Financial Situation. ...
  • 2) Determine Financial Goals. ...
  • 3) Identify Alternatives for Investment. ...
  • 4) Evaluate Alternatives. ...
  • 5) Put Together a Financial Plan and Implement. ...
  • 6) Review, Re-evaluate and Monitor The Plan.

What are the 8 steps of financial planning? ›

8 Keys to Good Financial Plans
  • Setting financial goals. ...
  • Net worth statement. ...
  • Budget and cash flow planning. ...
  • Debt management plan. ...
  • Retirement plan. ...
  • Emergency funds. ...
  • Insurance coverage. ...
  • Estate plan.

What are 7 steps of planning? ›

How to Strategic Plan in 7 Steps
  • Step 1: Environmental Scan. ...
  • Step 2: Internal Analysis. ...
  • Step 3: Strategic Direction. ...
  • Step 4: Develop Goals and Objectives. ...
  • Step 5: Define Metrics, Set Timelines, and Track Progress. ...
  • Step 6: Write and Publish a Strategic Plan. ...
  • Step 7: Plan for Implementation and the Future.
Apr 26, 2022

What are the 7 steps to financial freedom? ›

You can too!
  • Save $1,000 for Your Starter Emergency Fund.
  • Pay Off All Debt (Except the House) Using the Debt Snowball.
  • Save 3–6 Months of Expenses in a Fully Funded Emergency Fund.
  • Invest 15% of Your Household Income in Retirement.
  • Save for Your Children's College Fund.
  • Pay Off Your Home Early.
  • Build Wealth and Give.

What are the 7 disciplines of financial planning? ›

It is crucial to help you manage your cash flow, increase savings, and make good investments. This way, you can achieve financial freedom and grow your business. Seven key components make up a good financial plan. They include budgeting, debt management, insurance, investment, emergency funds, and estate planning.

What are the 7 categories of a financial plan? ›

The plan should include details about your income, expenses, savings, debt management, insurance, taxes, investments, retirement, and estate planning.

What are the 7 key components of financial planning according to Dave Ramsey? ›

Dave Ramsey's 7 Budgeting Baby Steps
  • Step 1: Start an Emergency Fund. ...
  • Step 2: Focus on Debts. ...
  • Step 3: Complete Your Emergency Fund. ...
  • Step 4: Save for Retirement. ...
  • Step 5: Save for College Funds. ...
  • Step 6: Pay Off Your House. ...
  • Step 7: Build Wealth.
May 21, 2024

What is a financial planning process? ›

Financial planning is the process of assessing the current financial situation of a business to identify future financial goals and how to achieve them. The financial plan itself is a document that serves as a roadmap for a company's financial growth.

What is the 6 step financial planning process? ›

There are six steps in the financial planning process: understanding your financial circumstances, identifying goals, analyzing your current course of action, developing a financial plan, and monitoring progress and updating. This is a great question to ask if you're considering working with a financial planner.

What are the 5 steps of financial planning? ›

Plan your financial future in 5 steps
  • Step 1: Assess your financial foothold. ...
  • Step 2: Define your financial goals. ...
  • Step 3: Research financial strategies. ...
  • Step 4: Put your financial plan into action. ...
  • Step 5: Monitor and evolve your financial plan.

What are the 7 key components of effective financial planning? ›

Here are the crucial components of a financial plan:
  • Business Goals and Objectives. ...
  • Budgeting and Financial Forecasting. ...
  • Cash Flow Management. ...
  • Capital Expenditure Planning. ...
  • Debt and Financing Strategy. ...
  • Profitability Analysis. ...
  • Risk Management and Contingency Planning.
Jan 24, 2024

What are the golden rules of financial planning? ›

You must save at least around 10% of your income every month. Holding the funds and investing them in liquid funds will help you. Liquid funds are a type of debt mutual fund that invests money in fixed income instruments like FDs, paper, deposit certificate, etc.

What are the 10 steps in financial planning? ›

As you gather information to begin your financial planning journey, we've outlined ten easy steps to help you get started:
  • Step 1: Think about the end goal. ...
  • Step 2: Understand where your money goes. ...
  • Step 3: Evaluate your net income. ...
  • Step 4: Calculate your net worth. ...
  • Step 5: Review all of your income sources.
Nov 10, 2023

What are the seven 7 process in capital budgeting? ›

What are the seven capital budgeting techniques? The seven techniques include net present value (NPV), internal rate of return (IRR), profitability index (PI), payback period, discounted payback period, modified internal rate of return (MIRR), and real options analysis.

What are the 3 rules of financial planning? ›

Finance experts advise that individual finance planning should be guided by three principles: prioritizing, appraisal and restraint. Understanding these concepts is the key to putting your personal finances on track.

Top Articles
Latest Posts
Recommended Articles
Article information

Author: Allyn Kozey

Last Updated:

Views: 5471

Rating: 4.2 / 5 (43 voted)

Reviews: 90% of readers found this page helpful

Author information

Name: Allyn Kozey

Birthday: 1993-12-21

Address: Suite 454 40343 Larson Union, Port Melia, TX 16164

Phone: +2456904400762

Job: Investor Administrator

Hobby: Sketching, Puzzles, Pet, Mountaineering, Skydiving, Dowsing, Sports

Introduction: My name is Allyn Kozey, I am a outstanding, colorful, adventurous, encouraging, zealous, tender, helpful person who loves writing and wants to share my knowledge and understanding with you.