Financial Planning Process | JamaPunji (2024)

The correct investment strategy and sound financial advice will determine how you live today and in the future. There are six stages to develop a financial plan and to carry out personal money management. From beginning to end, a certified financial planner professional guides you through the financial planning process - keeping in view your current financial situation and economic background.

1) Identify your Financial Situation

The first stage of the financial planning process constitutes assessment on what is happening in your life right now and how you can change your financial situation. The key areas to reflect are:

Household budgeting –This is an important area as after calculating the monthly costs spent at home, you’d be able to figure out how much you are left with to save or invest.

Family commitments and Living Expenses – Are you single or married? Do you have children? What are their living and lifestyle expenses?

Tax Standing and Strategies – How do you manage taxes? Are you living or working abroad?

Current investments or saving reserves – How much savings or debts you have right now?

Other Financial obligations – These may involve some miscellaneous costs you might be planning ahead for future such as:

• A wedding or property purchase
• Emergency funds to cover for household catastrophes
• Family Funds reserve in case something happens with your job or you
• Is your retirement just around the corner?

This step serves as a foundation for developing your plan and gives you a good reference point to achieve your short as well as long term financial goals.

2) Determine Financial Goals

Experts say when you have identified your goals; you’re most likely to achieve them. Highlighting the financial goals serves as an important aspect of financial planning. Subjected to what phase in life you have reached, these goals could be:

• Get married and initiate a family
• Purchase or pay off a property
• Ensure your children get a good education
• Make your reserves and investments tax proficient
• Get retirement with enough income on hands to enjoy life ahead

The sole purpose of this step is to differentiate your needs from your wants. Apart from these, the goals or objectives may range from spending your entire income into developing a long lasting investment program for future financial security. However, you must select which goals you need to pursue.

3) Identify Alternatives for Investment

After a thorough understanding of your financial needs has been taken and all the appropriate financial goals have been cemented down, next thing is the investment alternatives or specific recommendations from your financial planner.

By taking a good look at your short, medium and long term goals, an integrated investment strategy would be developed based on your set requirements. Furthermore the objectives would be looked upon again and it will be analyzed how far you are down the road to achieving your short and long term financial goals. Taking in account your timeframe, cash flow, risk tolerance, current insurance coverage, tax strategies and investment goals, a range of ideas and financial planning alternatives would be presented in order to determine which one suits you the best. This will help you produce more actual and satisfying decisions.

4) Evaluate Alternatives

The proposed recommendations are then further assessed. This is your chance to discuss the alternatives face-to-face and take necessary actions bearing in mind your current situation, financial standings and personal interests. If you have any concerns regarding your financial planner’s recommendations, those can be altered and revised. Alternatives can be closed down based on the decisions you make. For instance:

The idea to carry on your education attests you cannot do a full time job. Decision making thus stands as an ongoing process which works side by side with your personal and financial situation so lost opportunities as a result of your decision making should always be kept in mind while analyzing the alternatives.

Risk Evaluation

While evaluating the options you might end up having uncertain ideas. For instance, choosing your career over studies involves risk. How can you ensure if it’s rewarding in your future?
Other financial decisions involve a comparatively low degree of risk such as saving your money in a savings account or purchasing some object of great value with it. The option of losing that object is low in such scenarios.

Thus while making financial decisions; finding out risks and evaluating them is tricky. You need to collect data based on your experience and the experiences of others as well. Decision-making process will require you to frequently update your knowledge politically, economically and socially so you can make informed decisions.

5) Put Together a Financial Plan and Implement

Once you are content with the recommendations and feel good to proceed, the implementation of the plan would be carried out. This step of financial planning process can be considered as an action plan where you will pick ways to achieve your short, immediate or long term goals. Often taken as the toughest step for some people, but makes a huge difference in the long run!
The key thing to consider here is to carry it out as early as you can. The longer it’s left unattended, the longer it will take you to grow your wealth – ultimately a great shortfall in your savings when you retire.

6) Review, Re-evaluate and Monitor The Plan

Financial planning is an on-going and dynamic process and it’s unlikely that your financial condition will remain same throughout your life. You need to assess your financial decisions periodically as changed personal, economic and social factors will require you to alter your decisions to fit into your new situation.

As you progress through the different phases of your life, you financial needs will be reflected and financial process will serve as a tool to let you adjust to these changes. Monitoring your plans will help you prioritize your decisions and make necessary adjustments that will bring your financial needs and goals in line with your current life situation.

Financial Planning Process | JamaPunji (2024)

FAQs

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

7 Steps of Financial Planning
  • Establish Goals.
  • Assess Risk.
  • Analyze Cash Flow.
  • Protect Your Assets.
  • Evaluate Your Investment Strategy.
  • Consider Estate Planning.
  • Implement and Monitor Your Decisions.
  • AWM&T: Your Choice for Financial Fitness.

What are the processes of financial planning? ›

Scrutinize your income, expenses, assets, debts, investments, and other financial commitments. Assess whether you're making progress towards your short-term and long-term goals, or if adjustments to your spending and saving habits are necessary.

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 5 key areas of financial planning? ›

In this blog, we explore the five key components of a financial plan and how they work together.
  • Investments. Investments are a vital part of a well-rounded financial plan. ...
  • Insurance. Protecting your assets—including yourself—is as important as growing your finances. ...
  • Retirement Strategy. ...
  • Trust and Estate Planning. ...
  • Taxes.
Feb 9, 2024

What are the four basics of financial planning? ›

Use this step-by-step financial planning guide to become more engaged with your finances now and into the future.
  • Assess your financial situation and typical expenses. ...
  • Set your financial goals. ...
  • Create a plan that reflects the present and future. ...
  • Fund your goals through saving and investing.
Apr 21, 2023

What are the 10 steps in 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 6 strategies of financial planning? ›

The Financial Planning Process
  • Step 1: Set Goals. While this seems pretty basic, this step often gets overlooked. ...
  • Step 2: Gather facts. ...
  • Step 3: Identify challenges and opportunities. ...
  • Step 4: Develop your plan. ...
  • Step 5: Implement your plan. ...
  • Step 6: Follow up and review yearly.

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.

What is the life cycle of financial planning? ›

Life-cycle financial planning helps to understand the dynamic nature of your family's financial risks presented and developed in a plan that evolves over time to meet those changing needs. The stages of life-cycle planning can be seen in 3 simple phases: Accumulation, Preservation and Transfer.

How does a financial plan look? ›

A financial plan is a comprehensive picture of your current finances, your financial goals and any strategies you've set to achieve those goals. Good financial planning should include details about your cash flow, savings, debt, investments, insurance and any other elements of your financial life.

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 the six principles of financial planning? ›

Watch to learn about six personal finance topics that can have a big impact on your life: budgeting, saving, debt, taxes, insurance, and retirement.

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 6 parts of a financial plan? ›

The six components of a financial plan include tracking income and expenses, budgeting, saving and investing, insurance, and retirement planning. By understanding and implementing these components, freelancers can create a secure financial future. It's essential to start planning as soon as possible.

What are 5 stages cycles of financial planning process? ›

Life cycle financial planning can be separated into five stages: teenage years (13-17 years old), young adulthood (18-25 years old), starting a family (26-45 years old), planning to retire (45-64 years old), and successful retirement (65 years old and above.)

What are the 5 steps in the planning process? ›

What are the 5 steps in strategic planning?
  • Step 1: Assess your current business strategy and business environment. ...
  • Step 2: Identify your company's goals and objectives. ...
  • Step 3: Develop your strategic plan and determine performance metrics. ...
  • Step 4: Implement and share your plan. ...
  • Step 5: Revise and restructure as needed.
Jan 23, 2024

What are the 5 steps in the financial decision making process? ›

With or without a financial planner, you can whip up your plan in five easy 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 5 financial life stages? ›

We help you enact a plan that keeps you moving forward through the stages of the Financial Life Cycle so you can ultimately reach your goals.
  • FORMATIVE STAGES - AGES 0-19. ...
  • BUILDING THE FOUNDATION - AGES 20-29. ...
  • EARLY ACCUMULATION - AGES 30-39. ...
  • RAPID ACCUMULATION - AGES 40-54. ...
  • FINANCIAL INDEPENDENCE - AGES 55-69.

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