How to Create Your Own Financial Planning Process

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It’s no secret that having a financial plan is super critical to achieve financial success. Creating a financial plan is useful because it gives you a strategy to reach your goals, as well as clarity and confidence in regards to the path you need to take in order to reach them.

Having a solid financial plan in place will set the path to achieving whatever financial goals you want to reach. But more importantly, a proper plan (and planning tool) allows you to track your progress in all areas of your financial life, including your debt, investments, and retirement. The ability to track your progress opens the door to making adjustments, accelerating, or even decelerating your goals based on your current financial situation or external factors that may come up. 

Today I am going to outline the 5-step process I follow to create my own financial plan, as well as the plan I help my clients follow when creating their own financial plan. This process serves as a guideline to break down an otherwise intimidating process, so that you can actually start building the future you want to live.

5 Step Financial Planning Process

1. Understand Your Current Financial Situation

Before you can even start thinking ahead, you need to know where you are right now. This will serve as your starting point, and lay the groundwork for setting your financial goals. In order to audit your current financial situation, you need to identify the following:

  • Assets- your checking account, savings account, real estate, and investments or retirement accounts you have

  • Liabilities- all of your debt payments, including student loan, car payment, mortgage, etc.

  • Income information

  • Credit report ( I use Credit Karma)

If you struggle to gather all of this information, it could be a sign that it’s time to organize your finances and consolidate your accounts. Check out this post where I break down the financial accounts I have to stay organized and keep my finances minimal!

2. Set Short- and Long-Term Goals

Setting goals is going to give you the destination you are working towards. Would you give someone directions to nowhere? Probably not, and I want you to treat financial planning the same. You can’t create a plan without an end goal, so this is where you will lay that out.

I focus on having both short- and long-term financial goals, because life isn’t linear and it’s important to be both focused on the near future while planting the seeds for the distant future as well. Short-term goals should be focused on the next 1-3 years, while long-term goals go beyond 3 years all he way to retirement. 

The goal setting method I follow is the SMART method, which I apply with a financial framework. I lay out how to properly set financial goals using this method in The Financial Audit Toolkit.

3. Create Your Plan

This is the fun part, and it involves building out your spending plan, as well as your debt payoff plan, your investment plan, and everything in between.

Your spending plan is your budget, and to do this you need to identify what your  bare minimum expenses are, and how much you want to spend on discretionary items and activities. 

Once this is laid out, you can also start allocating money towards your short-term and long-term savings goals, based on your income and your expenses that you’ve already laid out. I aim to set aside 50% of my income towards these goals, but that is a guideline and isn’t possible for everyone. 

Part of your savings goals can include investments and retirement. This can be pretty challenging to forecast, since we never know what the future holds and returns are not guaranteed. I use an online investment calculator as a tool to predict how much I need to invest over a set period of time to reach my goals. My favorite calculator is this one. 

Creating your plan doesn’t need to be complicated, so start with the simple areas and build on it as you go. I focus first on my monthly plan, which I then morph into longer-term planning (annual) and shorter term (weekly). My favorite financial planning tool is The Personal Finance Dashboard, which is how I manage my own money. You can purchase it here.

4. Implement Your Plan

While this sounds like the easiest step, it can actually be the hardest part of this process. Taking action is challenging, especially if you are unsure of if you are even doing the right things. Implementing your plan is how you will actually reach your goals; you have to do what you say to get to where you want to be.

The focus in this step should be on consistency, and keeping promises to yourself. Why did you create this plan in the first place? What are the external factors that make it challenging to stick to? The answers to these questions will help you in the final step of this process. You can also automate your finances if this step proves to be challenging, which I talk more about here. 

5. Analyze, Adjust, Pivot

This is where the magic happens! The fortune is always in the follow-up, and following-up with your financial plan on a regular basis is critical. Life changes constantly, and so should your financial plan.

On a monthly basis, I recommend a complete audit of your plan following the process I outline here. I regularly go in and adjust my plan based on circumstances in my life that have changed, or different events or activities that popped up that I didn’t necessarily plan for in advance. 

Our lives are dynamic, and our plans should be, too. Remember a plan is simply that; a plan. It’s never set in stone, so it is super important to make adjustments and pivot as you move through life. Just always remember to keep the end goals in sight, and keep in mind that sometimes our goals need to be re-evaluated as well.

In Closing 

Financial planning is a process that I am really passionate about because creating my own financial plan has given me so much clarity and confidence in my financial situation. I see so many women, both my age and older, who are struggling financially and don’t have a plan in place to change their path. While money isn’t everything, it is a tool that opens doors and creates opportunity in our lives. Knowing how to manage it and plan with it will change your life for the better, and even if a plan doesn’t magically make money out of thin air, it will give you confidence in your financial decision-making so you can take your power back.

I work 1:1 with clients to help them build better budgets and financial plans, as well as learn the fundamentals of personal finance. You can book your individual session with me here. 

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