First Step In Financial Planning? What Steps To Follow After

October 28, 2021
First Step In Financial Planning? What Steps To Follow After

Financial planning is a method of putting your finances in order so as to better protect your future

and that of your dependents. A financial plan gives you a sense of financial security that allows you

to spend rightly and save adequately. It also helps you take care of your debts in a structured way

that will prevent them from choking you. The very first step to take in financial planning which is

usually overlooked is to decide that you need one. After deciding that you want to set up a financial

plan to help monitor your present and future finances, you can then engage the services of a reliable

financial advisor to help you with a preferred structure. Find the 10 key components to financial planning to help you build out your process fully.

This article will talk about the various steps involved in having a practicable financial plan that will

secure your future and that of your dependents. Having a financial plan will enable you to have

control over your income, expenses, and investments to achieve your financial and life goals. From

the moment you decide to have a financial plan, the first step is to assess your financial position so

as to know where to start from. You determine your current income, and future possible income,

with your daily and monthly expenses. You will also need to assess your debt situation to know your

obligations. After the assessment, there are subsequent steps that you may need to take to ensure

your financial plan takes root. Some of the other steps that will be discussed include developing

financial goals, a budget, and a plan to service your debts.

What Is The First Step In Financial Planning?

We all make hundreds of decisions every day, some with reasons and some without reasons but all

decisions we make have both short and long-term consequences on our future. This is why having a

financial plan is considered one of the most prudent decisions you will ever make. It will help you

monitor your finances and secure your future. As it is with other things, a future position, there must

be an analysis of a current situation. When it comes to wealth management and financial planning,

the very first step financial advisors encourage is the analysis of your current financial situation.

Analyzing Your Financial Situation

This step of the financial planning process is the first and comprehensive view of where you are

financial, considering your income, expenses, savings, investments, debts, and taxes. In analyzing

your current financial position, you will have to prepare a list of your current assets, debt balances,

interest rates, your daily, weekly, and monthly expenses. This will give you a foundation for workable

financial planning.

It is advisable to engage the services of a professional financial planner that will collate all your

financial documents to determine your current financial position and help you design a structure

that will require that you make some changes in your financial lifestyle. During this stage, some

questions will be asked which will bother on your lifestyle goals, financial goals, risk tolerance, and

credit card transaction. After getting the much needed information and determining your current

financial position, changes may be made to your financial structure mostly in your expenses, savings,

and investments. These changes will be in line with your desired financial goals which will probably

be your next step in the financial planning process. Once a review of your financial position is

complete, it will be easier to proceed to the next steps of your financial plan.

What Is The First Step In Financial Planning For A Baby?

For most, having a baby is desirable, and having a good financial plan alongside will go a long way in

securing the future of your child. It is advisable to start your baby’s financial planning as soon as you

realize your baby is on the way.

Whether you decide on time before birth or immediately after birth that you want to have a financial

plan for your baby the first thing to do is to update your financial plan to accommodate your baby's

arrival. Most importantly your monthly budget. Once a baby is in the picture, you may need to

review your monthly budget to accommodate the baby’s needs. Most people underestimate the

expenses that follow the arrival of a new baby, therefore the adjustment you make may be a

significant one, especially for first-timers who have to buy new baby needs such as cribs, swings,

toys, and car seats. You have to create room for expenses such as diapers, infant medicines and food,

and visits to the pediatrician. Having a financial plan for your baby is the first step of good


What Are The Next Steps Once You Analyze Your Financial Position?

After you must have analyzed your current financial situation, there are other steps you will need to

take to put your financial plan in good shape. Some of these steps include:

Identify Your Financial Goals

Once you have reviewed your financial position and you know what your financial strengths and

weaknesses are, the next step is to develop your financial goals. Your financial goals will serve as a

roadmap to your financial future. You can divide your goals into short-term, medium-term, and

long-term goals. It helps you differentiate your needs from your wants. Your financial goals must be

reviewed regularly to capture any change in your financial situation.

Developing a Strategy For Your Financial Plan

This step enables you to come up with savings and investment plans that will help you improve your

financial situation and attain your financial goals. You can design how your money will be spent on

things like savings, investments, and bills. The financial strategy will also create a road map on how

to increase your income, either through job-hopping, side hustles, and a salary raise. Having a

strategy also brings other areas of your financials to the fore. It will help you consider areas like

estate planning and insurance. This will also help you strategize on the type of investments that will

grow your savings into what will protect your financial future. Your investment strategy will depend

on things like your personal needs, risk tolerance, and financial goals

Engage The Services Of A Financial Advisor

A professional advisor is quite necessary when it comes to financial planning, especially if you have

complex financial needs. A financial advisor will guide you in putting your financial plan in place. He

may also introduce you to a network of other professionals such as a tax lawyer, an insurance specialist, and

investment advisors, that you may need to implement your financial plan. A financial advisor will

review your financial plan and his expertise will help straighten any grey areas in your plan.

Evaluate Your Strategy

Having come up with a financial plan strategy, it is easy to lose track of some of your needs and

strategies. There might also be a couple of strategies that may not fit into your financial goals

together. Evaluating your strategies will help you identify any loopholes in your financial strategies

and plans. This is the time to discuss with your spouse, attorney, and your investment house to

ensure everyone is on the same page. This is also where your financial advisor evaluates your

proposed strategy and ensures it aligns with your risk appetite and goal. He may also make his

recommendations which you should consider.

Risk Evaluation

This is also another important step in financial planning which may make or mar the success of your

plan. There are inherent risks in every financial plan and it is important to evaluate each risk and

decide whether it is worth taking on. For example, you may have a plan to sacrifice further studies

for work in order to earn more income. While this may be a good plan in the short term, it may

become a problem in the long term because you may not be able to advance in your career due to

your limited education. These are the types of risks that must be evaluated before implementing your

financial plan. Another important risk that should be evaluated alongside your planning includes

your investment risks. This is what will determine how your savings will grow.

Implementing Your Financial Plan

After so much work has been put into the planning stages, the implementation stage is one of the

most challenging stages of financial planning. This is the stage where you chart different courses of

action for the success of your financial plan. At this stage, you have to make hay while the sun shines

by implementing every decision as and when due. For easy implementation, you can create a budget

calendar for your expense to ensure that you are not ahead of your budget at every specific period,

set dates and reminders to complete some financial tasks, and implement decisions. You need to

have your financial advisor on speed dial at this stage because his recommendations, guidance, and

network will come in very handy. He may also handle interaction with financial product providers on

your behalf.

Monitor and Update Your Progress

This is a very important stage because it is what will ensure the sustainability of your financial plan.

You must continue to monitor and update your financial plan until you meet every goal in your plan.

As you progress through the different phases of your life, your priorities and situations may change

which may require some tweak in your financial plan. Periodic monitoring and update of your

financial plan will help you adjust your financial plan to reflect your current situation. It will also

help you to prioritize your financial decisions and make necessary adjustments that will align your

financial needs and goals with your current life and financial situation.

Financial Planning Steps Conclusion

Financial planning is a very important process that required a properly defined and documented

process (you can read our blog on Financial Planning Checklist) as listed in this article. When you

follow a systematic process in setting up your financial plan, you are guaranteed a reasonably

financially secured future. It not only protects your finance, but it also makes provisions for your

loved ones and ensures that they are properly taken care of as your dependents. While a financial

plan may not give you a foolproof financially secure future or wealth creation, it will, however,

provide you with the opportunity to look towards attaining wealth and a financially secure future

with proper analyses, discipline, and the expertise of a financial advisor.

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