What exactly is a financial plan and why do I need one anyway? You may have found yourself asking these questions when listening to financial commentators. Understandably, as the term “financial plan” sounds important and authoritative yet still vague. After all, having a plan seems better than not having one but where do you start and how does this whole process work? What goes into developing your financial plan? These are the four critical steps of financial planning. They may show up differently at times but a proper planning experience will include them.

Where Are You Going? – Goals

Before any type of planning, you need to have an idea of where it is you want to go. This is where goals come in. You can find your goals through a variety of questions:

  • “What are you trying to achieve?”
  • “What does success look like to you?”
  • “What is important to you?”
  • “What, if not accomplished, would be disappointing to you?”

However you arrive at them, whatever question they are answering, the goals you set become the destination for your plan. These are the targets for the plan you put in place. This is why it’s critical for your goals to be personal to you, not simply some rule-of-thumb or borrowed idea. The more personal the goal is to your life and your values the more passionate you will be about pursuing it.

Where You Are – Resources

Once decided where you want to go it’s important to assess your starting point, including the resources available. This becomes the current snapshot of your financial plan and includes things such as;

  • Assets (investments, property, savings, business interests)
  • Debts (mortgage, loans, credit cards)
  • Income (salary, pension, social security, investment income)
  • Expenses (monthly budget/cash flow)
  • Future Expenses (home maintenance, auto purchases, medical or end-of-life care)

The resources you have available to you and how you manage them are critical to understanding the journey from where you are to where you want to be.

How To Get There – Planning

Only after knowing where you want to go, and your starting point, can you develop a plan for the journey. This phase of the process is quite collaborative as you and your planner explore possible routes to achieving your goals. Inevitably, the process also uncovers some obstacles. These hindrances are a natural part of the journey and benefit from the objectivity of your planner to help navigate and find solutions. For example, your savings rate may be lower than required to meet your goals. While one solution is reducing spending, a planner may also look to raise income, allowing you to meet your goal with less impact on your lifestyle.

Staying On Course – Maintenance

Though many people think the planning process is complete once the plan is on paper, this couldn’t be further from accurate! As with any good journey, many things change en route to the destination. This is where regular updates and maintenance become an important piece of the plan success. As life circumstances and variables in your plan change, it becomes important to see the effect these changes have on your plan. By updating and revising the plan as new details emerge, you leave yourself with more options and a longer timeline to achieve your goals. Further, if any changes negatively impact your plan, assessing them quickly may reduce their impact.

Get Started on Your Plan

Our process begins by completing our LIFE plan questionnaire. Once completed, we use this data to complete a hardcover plan that becomes the starting point for future financial and retirement goals.

Download our LIFE questionnaire here to get started.

Or, contact us for more information.