The 7 crucial steps in financial planning

At Acumen, clients often ask us: “What are the steps involved in the financial planning process?” In actual fact, there is a tried and tested methodology to financial planning that anyone can implement to help them achieve their financial goals. Here, we enlisted the expertise of Chartered Financial Planner, Daniel Frampton to discuss the seven most important steps in financial planning to help you plot your course towards success.

The value of financial planning

Before we dive into the most important steps in financial planning, it is well worth considering the “why” behind financial planning and just how valuable it can be. An oft-cited 2017 study by the International Longevity Centre (ILC) and Royal London found that financial advice could make someone nearly £50,000 (£48,000 to be exact) better off over a ten-year period compared to someone who didn’t seek out advice. 

The study followed Britons who enlisted the advice of a professional financial adviser between 2001 and 2006. It found that the overall value of advice – measured against a range of assets, such as pensions, savings and investments – was roughly 2,400% greater than the cost of the initial consultation. The positive effects were the keenest felt by those with less disposable income and those who sought out advice on multiple occasions.

7 steps to financial planning success…

In the journey towards financial security and freedom, having a well-defined plan is paramount. Whether you’re aiming to retire comfortably, save for your children’s education, or build wealth for the future, effective financial planning can pave the way for achieving your goals. Here are seven crucial steps to guide you through the process.

1. Establish your goals
   

Before diving into the intricacies of financial planning, take the time to clearly define your objectives. What do you want to accomplish? “Your goals could range from buying a home to paying off debt, saving for retirement, or funding a dream holiday,” said Chartered Financial Planner at Acumen, Daniel Frampton. “Establishing specific, measurable, achievable, relevant, and time-bound (SMART) goals can give your financial plan clarity and direction.”

2. Gather financial details
   

Once you’ve identified your goals, gather all the relevant financial information together. “This includes income sources, expenses, assets, liabilities, investment accounts, insurance policies, and any other financial commitments you might have,” said Daniel. “Once you have a comprehensive understanding of your current financial situation, you can start to lay the foundations for effective planning and decision-making moving forward.”

3. Assess your situation
   

With your financial details in hand, conduct a thorough assessment of your current situation. “Analyse your income, expenses, and savings patterns to determine your cash flow,” said Daniel. “Assess your assets and liabilities to understand your net worth, then evaluate your risk tolerance, investment knowledge, and financial obligations. This assessment will provide insights into areas that require attention and opportunities for improvement.”

4. Develop a financial plan
   

Armed with a clear understanding of your goals and financial situation, it’s time to craft a customised financial plan. “Your financial plan should outline specific strategies and actions to achieve each of your defined objectives,” continued Daniel. “Consider factors such as budgeting, saving, investing, debt management, insurance cover, and tax planning. You should tailor your plan to align with your priorities, timelines, and risk preferences.”

5. Execute your financial plan
   

Putting your financial plan into action is a crucial step towards realising your goals. “Implement the strategies outlined in your plan, whether it’s automating savings, adjusting spending habits, diversifying investments, or refinancing debt,” suggested Daniel. “Stay disciplined and committed to following through with your plan, even when faced with challenges or temptations that could potentially force you to deviate from your goals.”

6. Monitor progress and adjust
   

Financial planning is not a one-time event but an ongoing process. “Regularly monitor your progress towards your goals and track your financial performance,” recommended Daniel. “Review your budget, investment portfolio, and other aspects of your plan to ensure they remain aligned with your objectives. Be prepared to make adjustments as needed, taking into account changes in your life circumstances, market conditions, or financial goals.”

7. Revise and refine over time
   

As life unfolds and priorities evolve, your financial plan should also adapt accordingly. “Periodically revisit and revise your plan to reflect changes in your goals, income, expenses, and risk profile,” said Daniel. “Stay proactive in optimising your financial strategy to maximise efficiency and effectiveness. Continuously learning about personal finance and seeking the professional guidance of a financial adviser can also help to refine your plan over time.”

Take your first steps in financial planning with Acumen

In summary, financial planning is a dynamic process that empowers you to take control of your financial future. By following these seven crucial steps and staying committed to your long-term objectives, you can build a solid foundation for achieving your financial goals and securing a brighter tomorrow. Remember, the key to success lies in clarity, diligence, and adaptability on your journey towards financial well-being.

However, you don’t have to go it alone. Teaming up with a financial advisory firm like Acumen can be an extremely worthwhile investment; one that pays for itself in the long run. Our dedicated team of independent financial advisers and chartered financial planners are here to help you develop a comprehensive financial plan that encompasses everything you need to establish, refine and achieve your financial goals.

Contact us today on 0151 520 4353 to arrange a consultation.