The Financial Planning Process

Financial planning or wealth planning is the process of creating an achievable roadmap for your life’s goals.

Financial planning or wealth planning is the process of creating an achievable roadmap for your life’s goals. The financial planning process involves several intensive steps, such as: 

  1. Defining your financial goals
  2. Assessing your current financial situation
  3. Developing a realisable plan of action
  4. Implementing that plan
  5. Monitoring and adjusting 

Whether saving for retirement, paying off debt, or planning for a major purchase or life event, tailored financial planning means the difference between success and failure. The financial planning process itself must be well-structured, thorough, and comprehensive. 

After painting a complete picture of your finances, the capable advisor defines the primary realisable goals relevant to you and how to achieve them. Of course, the ultimate goal remains long-term financial stability and success through the well-ordered mind. 

This article explores the five essential steps that are the foundation for a well-ordered financial planning process. In the greater scope of wealth management, financial planning continues to be a complex speciality requiring both experience and compassion. 

Source: finexplained

Defining Your Financial Goals 

As the critical first step of the financial planning process, it helps you clarify what you want, what’s achievable, and what you want to achieve in the long term. Further, it provides a path forward. There are five considerations to keep in mind. 

Short- vs long-term. We must identify whether your goals are short-term (less than one year), medium-term (one to five years), or long-term (more than five years). This aids goal prioritisation and the relevance level of available strategies. 

Measurable. After time durations are determined, we examine the specific numbers to which we must hold ourselves accountable. This lets us see where we could have met specific objectives. 

Realistic. Ambitious goals come with high risk, while realisable goals enable us to moderate that risk, especially over longer durations. Considering the current income stream, we can identify any weak points and define strategies for remedying them. 

Prioritised. An essential question inside any financial planning process: what can we do without, and what is imperative? Pre-paying school fees for possible tax benefits is a high-priority item, while an additional car is not. 

Value-aligned. Your values and priorities dictate how you spend your disposable wealth. Otherwise, why hire a financial planner? Your passions and beliefs should enter many of your financial and life goals.

Assessing Your Current Financial Situation

The second step of the financial planning process, it provides an essential baseline for evaluating your forward progress and the necessary plan of action. 

Income. We must evaluate the varied sources of income and their levels of consistency. For example, salary payments versus sporadic rental income. Then we factor in taxes, deductions, and all matters relevant to your legal jurisdictions. 

Assets. We then need to review the total value of your assets, including savings accounts, retirement accounts, investment portfolios, private funds, real estate, and other sources. Not only does accurately understanding your net worth open up new doors, but it guides the timeline for realising more significant goals. 

Liabilities. In short, we must ensure that all unnecessary liabilities are handled with the utmost care and urgency. While more time may be needed for property or loan balances, removing minor matters immediately improves your financial momentum and well-being. 

Cash flow. In the final but essential portion, we need to determine the current cash flow picture and how it can be adjusted to meet your financial goals. This is one area where experience and financial acumen becomes critical. 

Developing a Realisable Plan of Action

The third step of the financial planning process, developing a realisable action plan, entails producing a concrete strategy for achieving your financial goals. 

Set targets. After setting your financial goals through to bequests and the next generations of your family, set your smaller, achievable targets. The overall goal is to know how one achievement feeds into the next. 

Identify obstacles. We’re all familiar with the timeless maxim: life happens. So what are the expected and possibly unexpected obstacles you might face in your journey? Your advisor must account for these and structure finances accordingly. 

Choose the right strategies. Yes, easier said than done, but this is the substance of any worthwhile financial plan. What are the vital commitments? What are the appropriate structures? How many generations are in the family? Dozens of questions comprise this point. 

Monitor your progress. Some ideas feel good in the mind or work until the market or the Fed takes a turn for the worse. Your advisor must always be reachable in the event changes are needed. 

Implementing Your Financial Plan

The final step of the initial financial planning process, implementing your plan, must be done carefully and guided by experience. Just as timing investments significantly impacts returns, time also impacts long-term financial plans. 

Automate your savings. As an essential “Rich Dad Poor Dad” technique, define your monthly portfolio contribution before spending your regular income. This not only brings mental well-being and confidence, but ensures that your financial plan keeps to your desired goals. 

Stay disciplined. By defining your significant purchases for the next five years with a financial advisor, you can avoid unnecessary expenditures or liabilities while limiting debt exposure. In addition, a worthy financial planner gently reminds you of your long-term ambitions whenever appropriate. 

Remain ready to re-evaluate. This can be negative or positive. If the real estate or cryptocurrency markets take an upswing, then the immediate cash boon should be included if favourable. If events turn unfavourable, then it’s best to prioritise and move forward.

Closing Thoughts

Define, assess, develop, implement, and then monitor. These five steps comprise a great financial planning process. We say: don’t settle for anything less. This is the baseboard, the bare minimum you should expect. 

Financial planning differs from private banking or traditional wealth management because it focuses more on the individual and the long term. It is far more idiosyncratic, considering hopes, fears, desires, and flaws. As personal dreams make the best north star, compassion and an experienced ear make the best financial plan. 

Disclaimer: The author of this text, Paul Winder, has a career that spans over 30 years in the financial services sector with emphasis on creating products and services in the international tax treaty and estate planning arena. Paul is Head of Fiduciary Products & Markets at Deltec Bank & Trust and CEO of Deltec Fund Services,

The co-author of this text, Conor Scott, CFA, has been active in the wealth management industry since 2011. Mr. Scott is a Writer for Deltec International Group,

The views, thoughts, and opinions expressed in this text are solely the views of the authors, and do not necessarily reflect those of Deltec International Group, its subsidiaries, and/or its employees. This information should not be interpreted as an endorsement of cryptocurrency or any specific provider, service, or offering. It is not a recommendation to trade. 

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