The First Step in the Financial Planning Process


Step one of financial planning begins by gathering and organizing all relevant information, typically by gathering bank statements and documents that will help you gain greater insight into your finances.

Step two is setting clear goals – from creating an emergency reserve fund to developing a comprehensive savings and investment plan.

Identifying Your Financial Goals

People seek to manage their money more effectively for various reasons, including buying a home, paying off credit card debt, or saving for retirement. A financial planner can assist in identifying your goals and then provide recommendations to reach them.

Establish short, mid, and long-term goals. Your objectives should be specific, measurable, attainable, and relevant; setting short-term goals may involve setting up a budget, paying down debt, and opening an emergency savings account – this can free up cash flow that could help with progress on mid and long-term goals.

An excellent place to begin is by reviewing your cash flow, which can be done using budgeting apps that link bank and credit accounts together, giving a clear picture of money coming in and going out so you can prioritize needs accordingly.

Creating an Emergency Reserve

Financial experts often advise saving three to six months of expenses in an emergency fund. However, this can take time when starting from scratch. Therefore it may be more realistic for some individuals to set smaller savings goals and work toward this target amount over time.

At this step, collecting and organizing your financial information is essential. This includes bank statements, tax records, insurance policies, and any other documentation about your current situation. According to Bola Sokunbi of Clever Girl Finance, marking where these documents were found alongside amounts can make future reference easier.

Once your financial information is organized, the next step should be creating an emergency reserve fund. Although it may seem intimidating initially, saving even small amounts each week – such as forgoing matcha lattes once every four weeks – can go a long way towards creating your emergency reserve.

Managing Your Investments

Financial planners can be invaluable assets for managing investments. Their services range from creating portfolios that balance risk with long-term goals to regularly rebalancing them to maximize returns while meeting lifestyle, goal, and risk appetite considerations.

An inventory of your assets, debts, income sources, and spending is necessary for creating an accurate picture of your finances. To complete this step correctly, Bera suggests digging – this might involve accessing multiple bank accounts and reviewing prior pay stubs or invoices as part of this exercise. She advises keeping track of where each piece of information came from and its amounts owed – plus write it all down with relevant dates attached!

Step one is essential in creating a budget, managing debt, and building an emergency fund. Adopting these fundamental finance practices will strengthen your overall financial health and make long-term goals more attainable.

Creating a Comprehensive Financial Plan

As part of any comprehensive financial plan, you must identify your saving and eliminating debt goals. Setting clear, measurable targets will allow you to stay on track and make real progress toward meeting long-term financial objectives.

Your financial planner will review your current financial situation to assess living expenses, savings, income, assets, and debts – noting any improvements that could help improve them and suggesting changes that can help. This process could require login to multiple accounts to review pay stubs or emails to stay current on all information about yourself and keep all necessary records up-to-date.

Establishing an accurate picture of your finances takes some time and requires patience, but it is essential to creating an appropriate financial plan suited for your goals and objectives. Your financial planner should create a personalized plan with detailed budgeting, an emergency fund, and strategies for debt reduction and retirement savings plans.