What is the financial planning process?


A financial advisor will help you with comprehensive financial planning and advise you on what courses of action to take to prepare for your financial future and to provide peace of mind. 

Let’s get to the following commonly asked questions: 

  • What is financial planning?
  • What kind of process is financial planning?
  • What is the correct order for financial planning?
  • What is an example of the financial planning process?
  • How can the financial planning process be applied in business?

Q1. What is financial planning?

The financial planning process is a professional service for individuals and businesses that involves receiving financial advice and helping with individual financial circumstances in order to achieve a set of financial goals.

The personal financial planning process includes aspects such as:

  • Identifying and selecting goals
  • Assessing your current financial situation

You’ll then select goals relevant to your personal and financial circumstances such as:

  • Making an emergency fund
  • Paying off a credit card
  • Saving and investing money
  • Setting up a savings account

Financial professionals with a CFP certification assess their clients personal and financial circumstances in order to set planning strategies, whether you’re interested in devising an investment strategy or saving for your retirement. 

Q2. What kind of process is financial planning?

Financial planning is a constantly evolving and dynamic process that changes depending on your personal financial situation. Because your goals and objectives change over time, it’s essential to adapt your personalised financial plan every few years (or once you’ve reached your current goals).

If you need help with this, CFP professionals will constantly monitor your current course of action and will act as your financial advisor while you work through the planning process. They will offer you financial education throughout your journey. 

Q3. What is the correct order for financial planning?

Step 1: Define your short-term and long-term goals

Think about your current financial life. What have you already achieved, and what would you like to achieve in the near and far future? 

Setting your financial goals is the first step in the financial plan, allowing you to plan for your future. Your goals could range from purchasing real estate to retirement planning and should be personalised for you. Consult with certified financial planner professionals for advice on realistic goal setting.  

Step 2: Assess your current personal finance situation

Assessing your current situation with your financial planner involves looking at your current cash flow, your average debit card balances, and whether you have a personal loan to deduce your monthly disposable income. This will not only help you with day-to-day financial management but allows you to work towards your goals.

During this process, you’ll receive financial planning recommendations from your certified financial advisor. 

Step 3: Develop your financial plan

Once you’ve analysed your current finances, you’ll move on to developing the financial planning process to achieve your short-term and long-term goals. This will include putting money away every month into a checking account or savings account and investment planning with a financial professional. 

Step 4: Implement the financial planning process

All that’s left is to implement the steps of the financial plan into your personal banking choices, saving and investing consistently until you’ve reached your goals. 

Q4. What is an example of the financial planning process?

Let’s look at an example of how a financial advisor typically analyses the client's current course and gives the advice to help them reach their goals. 

Gregory is a 45-year-old earning an income of $45,000 per year. His financial goals include paying off his mortgage and credit cards, as well as adopting investment strategies to help his money go further. 

Gregory approaches a financial advisor to help him develop a plan. The advisor goes through Gregory’s current income and outgoings to assess his financial situation. After looking at his finances, the financial advisor deduces that Gregory has a disposable income of around $1,500 a month (after paying his mortgage, bills, credit card payments, and living costs). 

Gregory’s short-term goal is to finally pay off his credit card bill, currently sitting at $2,000. His long-term goal is to pay off his mortgage, which has around $50,000 left to pay. 

The financial professional sets the steps in the financial plan. This includes paying $250 more every month towards the credit card and increasing his monthly mortgage repayments by $1,000. 

Gregory also wants to explore investing his money. After consulting with his financial planner, Gregory decides to invest $250 per month in dividend stock funds to build an investment portfolio. 

Q5. How can the financial planning process be applied in business?

It is essential for businesses to have a financial plan to promote growth and prevent a loss of profits. 

A business will typically use its strategic plan to outline financial goals, as well as running costs such as paying back business loans or paying for business resources. That way, businesses can understand their current financial situation and set future projections while maintaining ethics and standards.

Summing up

Financial planning is essential for reaching your future goals. By following the steps of financial planning, you’ll not only better understand your current financial situation but manage your money wisely for the future. 

Set up a financial planning day with a professional for advice on everything from buying your first home to investing and retirement.

If you liked this article, follow our regularly updated blog for more financial advice. 

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Disclaimer: The author is not a financial advisor and the information provided is general in nature and was prepared for information purposes only. This article should not be considered to constitute financial advice. Accordingly, reliance should not be placed on this article as the basis for making an investment, financial or other decision. This information does not take into account your investment objectives, particular needs or financial situation.

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