6 Steps To Create A Financial Plan How To Build A Financial Plan?

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The financial planning process is a logical procedure. It is the ongoing process to help you make prudent spending decisions, invest, and transfer your income and assets to help you achieve your financial goals. For more details, refer to this Financial Plan Website.

You can create your Financial Plan by carefully going through all the steps. This article will discuss the 6 steps in financial planning required to create or build a financial plan. With this, you will easily understand the meaning of financial planning and all your queries will be sorted enough.

Steps For Making A Financial Plan :

The six steps of financial planning are given below and explained in detail:

Step 1: Determine Your Current Financial Situation

In this first step of the personal financial planning process, you will determine your current income, savings, living expenses, and debts. Preparing a list of current asset and debt balances and amounts spent for various items gives you a foundation for financial planning activities.

Step 2: Develop Financial Goals

The purpose of establishing the goal is to form the foundation or purpose of planning itself to begin with the financial journey with the clarification of a financial destination. Too many people save and invest money with no specific goals in mind.

The second step of the personal-finance planning process is defining your goals, which entails writing down or formalizing your financial plans, attaching costs to them, and determining when the money to accomplish those goals will be needed. Only when you set goals—analyze them and decide if you’re willing to make the necessary financial commitment to achieve them. Then only you can reach them.

Step 3: Convert Financial Goals to Plan

The third step is developing an action plan to achieve your goals. A solid personal financial plan includes an informed and controlled budget, determines your investment strategy and reflects your unique personal goals. This step involves notably three sub-steps, which are:

  1. Linking your current assets with your goals
  2. Linking your current and future savings to your goals
  3. Create alternatives – Developing alternatives is crucial for making a sound financial plan. Although many factors will influence the available options, possible courses of action usually fall into these categories:
  4. Continue the same course of action – Stick with current investment & savings plan.
  5. Change the current situation – Tweak it to make it more future goals oriented.
  6. Take a new course of action – Completely change your current financial strategy and overhaul needed in all financial aspects.

Based on these steps, you should have your Final Goal strategy ready with you, where you should be able to answer the following:

  1. What is the corpus required for the goal?
  2. How much investment is needed for each goal?
  3. Priority of Goals
  4. Are my Goals practical?

Step 4: Evaluate Alternatives

Once you have the final goals strategy, the next step is to scout for good assets for each goal. However, firstly you should know about all the types of financial help available:

  1. Equity
  2. Corporate Debt
  3. Govt. Debt
  4. Small Savings Scheme
  5. Real Estate
  6. Insurance
  7. Gold
  8. CryptoCurrency

You should select the assets, depending upon the following factors:

  • Your Risk Profile – Every individual has a different risk profile at another point in life. Some individuals may be conservative risk-takers by nature, and some may be due to bad experiences. Someone may be a high-risk taker when young and become a low-risk taker as age progresses. So, there are all kinds of individuals; it is essential to know what kind of individual you are at that particular point in time. Accordingly, you should consider and select the assets for investments.
  • Risk of each asset under consideration – Uncertainty is a part of every decision. Some decisions involve a shallow degree of risk, such as putting money in a savings account or purchasing items that cost only a few hundred Rupees. But certain assets come under very high threat, such as Crypto Currency, Futures etc. In many financial decisions, identifying and evaluating the risk is complex. The best way to consider risk is to gather information based on your experience and the experiences of the experts.
  • Pros/Cons of each asset – Apart from risk, there are many other aspects for selecting assets, such as ease of investing, liquidity, cost of ownership, ease of tracking, lock-in period, ease of redemption, etc. All these factors must also be considered before selecting the asset.

Based on your goals and the parameters mentioned above, you should finalize the asset type for each plan.

Step 5: Create and Implement a Financial Action Plan

To this point, the financial planning data has been gathered and analyzed, financial planning statements have been created, goals and objectives have been measured, and economic gaps (if any) are found. The next step in the financial planning process is implementing the financial plan’s recommendations. Though this is not the last step in the financial planning process, the most challenging work is behind you. Next, you need to create an ‘Action plan’. Your financial planning action plan should include all of the tasks you need to accomplish to improve your financial situation.

For example:

  1. Exit from any current investment (if required)
  2. Methods of Investing – Systematic/Lump sum
  3. Timelines of Investments
  4. How to automate investments & budget to simplify tracking
  5. Tax Planning – Make sure your investments are tax-efficient
  6. Estate Planning

When implementing a financial plan, you will probably need to rely on a few specialists such as Tax Professionals, Insurance Agents, Mutual Fund/Stock distributors, etc.

Step 6: Re-evaluate and Revise your Plan

Financial planning is a dynamic process that does not end when taking a particular action. You need to assess your financial decisions regularly. Changing personal, social, and economic factors may require more frequent assessments. When life events affect your financial needs, this financial planning process will help you adapt to those changes. Regularly reviewing this decision-making process will help you make priority adjustments to align your financial goals and activities with your current life situation.


Get your financials in order. The benefits are clear: a financial plan will allow you to track your progress, identify problems before they arise, budget effectively and make the most of your time, money and resources. So make the most of it by following InvestYadnyas’s 6 stages of financial planning!

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