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7 Steps of the Financial Planning Process
The financial planning process can hold a different meaning depending on who you ask. If you were to ask a random person on the street what the financial planning process is, they might say, “budgeting and saving money.” While this answer is not wrong, it’s only a small part of the actual financial planning process.

Finances are stressful enough without the added complications of planning your financial future — from your current financial situation to determining a retirement plan. Hiring a financial advisor can make this process easier by outsourcing this critical aspect of your life to a professional.

To achieve your financial goals, you need to set financial objectives and determine a plan to reach those objectives. There’s a lot that goes into building a financial plan. However, if you take the time to learn the financial planning process steps, you’ll know if and when is the right time to hire a financial advisor.

What Is The Financial Planning Process?

Simply put, the financial planning process is efficiently managing your money and achieving personal economic and financial satisfaction. This process also allows you to take control of your financial situation. Determining the suitable courses of action to achieve your financial objectives is what it’s all about when it comes to planning.

A financial plan should thoroughly detail your entire financial situation. A financial advisor who is working with you to build a financial plan should take a holistic approach. A holistic approach includes reviewing your current financial situation, investments, and short-term and long-term financial goals. They will look at how you currently spend your money, help you organize your finances, and help you with an investment plan. They may even help you with an estate plan when the time comes. This is why the financial process can be cumbersome and overwhelming to many people trying to do it themselves. There’s so much involved that it can be less time-intensive to hire a Certified Financial Planner™, who can help you with the small financial decisions and the large ones like retirement saving and investment planning.

Financial Planning Steps – From Start To Finish

There are several critical steps to financial planning that need to be taken to achieve financial goals successfully. If any action is overlooked, it could mean postponing your dream retirement or having to rethink your entire financial future and plans. There are seven crucial steps that you and a financial advisor need to take to make the whole process successful. 

Step 1. Find An Experienced Certified Financial Planner™ (CFP®)

Before you even begin the financial planning process, you need to find a Certified Financial Planner™. Without a knowledgeable and experienced CFP®, the entire financial strategy could fail, costing you your wealth and your dreams. You can’t develop a good plan without a CFP®, which is why this is the very first step and perhaps the most important and influential step. It would be wise to choose a CFP® that is experienced and knowledgeable. Furthermore, you should select a CFP® with fiduciary responsibility, meaning they have the heart of a teacher and not a salesperson, looking out for your best interests.

Step 2. Determine Your Present Financial Situation

With this step, you start getting into the actual financial planning process. Determining your present financial situation is an ideal way of laying down a foundation of financial planning activities. Gathering data, such as your financial documents regarding your savings, income, debts, and living expenses, is part of this step. If you don’t know your current financial situation, it’s impossible to determine the steps you need to take to reach your goals. 

Step 3. Develop Financial Goals

Once you’ve got your entire financial picture, you can start setting realistic goals with your financial planner. However, once you set goals, it’s important to revisit them periodically to view progress. Furthermore, to set your goals, you need to figure out how you really feel about money and why you feel that way. The real purpose of this careful analysis is to differentiate your wants and needs. Your philosophy towards money will determine how realistic your goals are and what steps you need to take to get there.

Step 4. Identify Alternative Courses of Action

Creating alternatives is vital for making sound financial decisions. Though various factors influence available options, there are possible and practical courses of actions that commonly fall into the following categories:

  • Expanding current situations
  • Continuing a similar course of actions
  • Changing the course of actions
  • Taking a new course of actions

Just like you may have backup plans when you go on a long road trip, so too should you have a backup plan for your financial future. This way, any detours will not keep you from reaching your financial goals. Furthermore, you’ll be able to make informed decisions if you can see all the potential outcomes and paths.

Step 5. Evaluate Alternatives

As part of the financial planning process, you also need to evaluate the potential course of action and consider your values, current life, and economic conditions. Each decision closes off alternatives, so proper decision-making is vital to your financial and personal situation.

Since uncertainty is always part of every decision, you need to evaluate the risks. In some instances, assessing risk is complex. To limit risk-taking, you need to gather information based on your own experiences and other people’s experiences. Also, use reliable sources with financial planning.

Step 6. Create and Implement Financial Plans of Action

In this vital step of the financial planning process, you will develop a plan of action to reach your goals. Doing so will require you to choose ways on how to achieve your financial goals. Upon attaining the short-term financial goals, your next priority will be more apparent. However, at this point, you will still need your CFP®’s help when implementing your financial plans of action.

Step 7. Reevaluate (and Revise) your Plan 

The financial planning process is a highly dynamic process that does not end when you take action. You will need to assess your financial decisions regularly and discuss any changes or revisions with your CFP®. Changing social, economic, and personal factors might require more frequent careful assessments.

If life events tend to affect your financial needs, a comprehensive financial plan will help you appropriately adapt to those changes. Regularly reviewing the process helps in making priority adjustments to your personal and financial decisions. It will bring economic activities and goals aligned with your present life situation.

The financial planning process is not easy and can be overwhelming to many people, so a financial planner is essential to finding and building the right financial path. If you are ready to go through the financial planning process, contact The Retirement Planning Group todayOur team of financial planners can help you with all of your financial planning needs.