What Are The Steps Involved In Financial Planning – 6 Great Steps

admin August 1, 2023
Updated 2023/08/01 at 10:50 AM
What Are The Steps Involved In Financial Planning

What are the steps involved in financial planning? This post will focus on putting you through a step-by-step guide to planning your finances.

Your financial future is best determined by the strong investment strategies and sound financial advice you receive and practice today.

There are great stages to rightly developing a financial strategy and carrying out your money management.

You can employ the expertise of a certified financial planner for a professional guide on how to go about your financial planning process having in mind your current financial status and economic background.

Without wasting time, Let’s get into the steps involved in financial planning. But before that, you should understand what financial planning is and its importance.

What is Financial Planning?

As defined by Smart Assets, Financial planning is the practice of putting together a plan for your future, specifically around how you will manage your finances and prepare for all of the potential costs and issues that may arise.

The process involves evaluating your current financial situation, identifying your goals, and then developing and implementing relevant recommendations.

Importance of Financial Planning

Financial Planning involves putting together objectives, procedures, and policies, as well as budgets concerning a particular financial concern.

This allows for adequate and effective financial and investment policies.

The benefits include the following:

  • Financial planning increases your savings

You can save money even without a financial plan. But, note that it is an inefficient way of going about it.

Financial planning creates an avenue to track your income and expenses.

This way, you can track how you spend and consciously cut down your costs. This automatically helps to increase your savings in the end.

  • Financial planning creates a better standard of living

Some people think living well requires making sacrifices to cover their EMI repayments and monthly bills.

On the contrary, If you have a good financial plan, there will be no need to compromise your lifestyle. Your goals can be achieved while living your best life.

  • It prepares one for emergencies

Financial planning involves creating an emergency fund. Make sure to save funds equivalent to at least 6 months of your Salary, Monthly.

By this, you will worry less about procuring funds in case an emergency arises.

Emergency Funds are necessary to take care of varied expenses quickly.

  • Financial planning ensures peace of mind

Planning your finances ensures that adequate funds are available to take care of your monthly expenses, make the investment to cover your future goals, and spend a little on yourself and your family, without problems.

Financial planning gives you the ability to control your income efficiently and have peace of mind.

If you haven’t reached this stage, you plan your way towards starting a financial plan.

If you are on the financial planning path, your destination is peace and it’s not very close.

What Are The Steps Involved In Financial Planning?

The process of a financial plan is outlined below:

Identify and Understand your Financial Situation

The first step in the financial planning process is assessing your stand, financially.

Ask yourself what is happening in your life at the moment and what you can do to change your financial status. reflect on the following:

Household budgeting: This is a vital aspect of financial planning after calculating what you spend at home, monthly. you’d be able to realize how much money you have remaining to save or invest.

Family responsibilities and living standards: Now, Are you married or single? Do you have kids? What is the cost of their living and lifestyle?

Tax strategies and standing: Do you pay taxes? How do you control taxes? Do you live or work abroad?

Recent investments or saving reserves: How much debt or savings do you have at the moment?

Other financial commitments (miscellaneous or plans):

• A property or wedding purchase
• Emergency funds to finance household catastrophes
• Family funds reserve in case you lose your job or something unexpected happens to you
• Are you about to be retired?

This is a simple process of developing your plan.  It serves as a good guide to achieving your long-term and short financial goals.

Develop your Financial goals

What are the steps involved in financial planning? The answer to this is determining your future plans. Ask yourself, What financial plans do I want to achieve in life?

Financial experts have asserted that when you identify your goals, it is most likely that you achieve them.

Highlight your financial plans whether big or small. It could be written on your diary, jotter, or sticky notes, and be specific about them.

Most of the achievable goals could be:

  • Get married and start a family
  • Buy or pay for a property
  • Purchase a car
  • Get proper education for your kids
  • Ensure that your investments and reserves are tax proficient
  • Retire with adequate income to enjoy your life.

the main focus of this step is to separate your wants from your needs.

Excluding these, your financial objectives might also range from splurging all your income into creating a long-term investment program for the betterment of your future.

Identify Different Investment Alternatives

The next step to take after studying your financial needs and goals is weighing different investment options or specific options from your financial planner.

There are many investment options for investors. Take a concrete look at your short, immediate, and long-term financial plans. This will help develop an integrated investment plan that will suit your requirements.

Also, the objectives would be checked and analyzed to discover how you’ve gone in achieving your financial goals; short and long–term.

Keep track of your timeframe, risk tolerance, cash flow, current insurance coverage, investment goals, and tax strategies,  a wide array of ideas and financial planning options will be displayed to know which 0ne resonates with you.

This strategy will help you produce great and satisfying decisions.

Equity funds are best for long-term goals like Children’s education, retirement planning, etc. For relatively steady income, devoid of risk, debt mutual funds is great.

ELSS fund(Equity Linked Saving Scheme) is good to save tax. In investing, financial experts have listed the benefits of mutual funds.

Investing in funds such as these consistently for a long time, you can achieve your goals and dreams.

Evaluate the Options and Choose the Right Plan

After identifying the different investment opportunities, It is time to make the right choice about the investment you would love to engage in.

When making your choice, bear in mind certain factors such as financial status, age, personal interests, goals, as well as risk appetite.

If the above factors apply, you might need to seek the help of your financial adviser to make good investment choices.

When you finally settle on the right investment, make sure you evaluate the risk by collecting data based on both your experience and the experiences of others.

Create a Financial Plan and Implement

Once you have chosen an investment plan that you feel good about, the next step is to implement the plan.

Run a financial planning process where you will determine ways to achieve your short, medium, or long-term goals.

This step is often the toughest for most people, but it is the best and you have results come in the long run.

You should consider starting the financial plan as soon as possible because the longer you leave it unattended, the longer your wealth growth will take.

It is ultimately one of the greatest shortcomings in your savings during retirement.

Re-evaluate, Review, and Monitor your  Plan

The financial planning path does not stop after you have invested your money. You should monitor the performance of the funds regularly.

If they perform badly, you should replace them with better funds that are performing. You should also assess your plans regularly because while growing your dreams and goals may not likely remain the same.

As you progress in life, for example, your financial priorities may change after you attend a certain phase of your life.

You have to make decisions to necessary changes that will put your financial goals in line with your recent life situation.


This post has succeeded in taking you a comprehensive insight on the subject, What Are The Steps Involved In Financial Planning?

As Benjamin Franklin said, “If you fail to plan, you are planning to fail.”

There are numerous financial goals you may be willing to achieve but to attend to them at the best point of your life, you must have a financial plan in place at an early stage of your life.

If you have successfully started your financial planning journey, Share your experience in the comment area.

Recent News

Share this Article
Leave a comment

Leave a Reply

Your email address will not be published. Required fields are marked *