The steps in financial planning aren’t as complicated as you may think. Whether you’re just starting to take control of your finances or reevaluating an existing strategy, creating a personal financial plan can help you better understand where you are today and what you need to do to reach your future goals.
A financial plan brings together different aspects of your financial life, including income, expenses, savings, investments, retirement, taxes, insurance, and estate planning. Rather than addressing each area independently, financial planning helps create a coordinated strategy based on your priorities. Partnering with a trusted financial advisor and following these six steps in financial planning can help you create a personalized strategy as you work toward greater financial security.
The financial planning process generally begins with identifying your goals and gathering information about your current finances. From there, you can develop a strategy, evaluate your options, put your plan into action, and make adjustments as your circumstances change.
At Good Life Private Wealth, our process partners you with an experienced wealth manager who can guide you through each of these steps.
The first step is always the same: deciding to start. Begin your financial plan by actively taking a more involved role in your finances. Congratulations! By reading this, you are already moving in the right direction. Think about what you want your money to accomplish.
Your goals might include an emergency fund, buying a home, reducing debt, preparing for retirement, or simply gaining a clearer understanding of your financial situation. Establishing those priorities gives your financial plan a purpose and provides a starting point for the decisions that follow.
Data collection is an essential step that gathers your financial information in one place. This may include your income, monthly expenses, debts, bank accounts, retirement accounts, investment accounts, insurance policies, tax information, and other assets and liabilities.
Your advisor will also work with you to identify your financial goals, determine the resources you may need to reach them, establish your time horizon, and assess your risk tolerance. Having a complete financial picture makes it easier to identify opportunities, potential gaps, and areas that may require greater attention.
A qualified advisor or wealth manager can use the information collected in the previous step to create a financial plan tailored to your situation. Your advisor will evaluate available strategies and opportunities and develop recommendations based on your goals. Depending on your needs, your financial plan may address areas such as:
Your existing accounts and financial documents should also be reviewed to determine whether they continue to support your current objectives. The goal isn’t simply to create a collection of financial products. It’s to develop a coordinated strategy in which each part of your financial life supports your broader goals.
At this stage, your advisor will go over the details and recommendations within your plan. This is your opportunity to understand the reasoning behind each recommendation and determine whether the proposed strategies fit your goals, priorities, and comfort level.
Based on the information presented, you can make informed decisions and finalize a plan that fits your situation. You may also want to consider including your spouse, partner, or other appropriate family members in relevant discussions. Beneficiaries should understand information that could affect them, particularly as it relates to your estate and legacy plans. A financial plan should be something you understand—not simply a document you receive and put away.
A financial plan only becomes useful when you put it into action. Plan implementation may involve adjusting your budget, increasing savings, consolidating or opening accounts, changing investments, reviewing insurance coverage, updating beneficiaries, developing a retirement income strategy, or completing other actions identified during the planning process.
Your advisor can help coordinate these steps and explain how each decision fits within your overall financial strategy. Implementation doesn’t necessarily happen all at once. Some priorities may need immediate attention, while others can be addressed gradually as you work toward your longer-term goals.
Financial planning isn’t a one-time event. Continue to monitor and adjust your financial plan, so it remains aligned with your life, finances, and goals. Your strategy should generally be reviewed at least annually, but significant life or financial changes may warrant an earlier review.
Consider revisiting your financial plan after events such as a new job, marriage or divorce, the birth of a child, a major purchase, an inheritance, retirement, or a significant change in income.
Changes in tax laws, financial markets, and your own priorities can also affect your strategy.
Following a structured financial planning process can help connect your short-term financial decisions with your long-term goals. Without a plan, it’s easy to treat saving, investing, taxes, insurance, and retirement as separate financial decisions. A comprehensive financial plan considers how those decisions interact. For example, increasing retirement contributions may impact your cash flow and tax situation.
At a minimum, consider conducting a comprehensive financial plan review once a year. However, annual reviews shouldn’t be the only time you communicate with your financial advisor. Life happens, goals change, markets fluctuate, and financial strategies sometimes need to be adjusted.
Communicating with your wealth manager is an important part of the financial planning process. If something changes, or part of your financial plan is confusing, your advisor should be available to discuss your options and help you understand how potential changes could affect your overall strategy.
Whether you’re brand new to financial planning or have been working toward your financial goals for years, following these six steps can provide a clearer framework for making financial decisions. Your financial plan should evolve with you. Regularly reviewing your goals, measuring your progress, and adjusting your strategy can help keep your finances aligned with the life you’re working toward.
At Good Life Private Wealth, our advisors are ready to help you work through the financial planning process. As a fee-only fiduciary, we are committed to working in our clients’ best interests.
Schedule a consultation to start building a financial strategy around your goals.
