6 Steps of Financial Planning

Earlier in October, we ran a series of amazing workshops in support of Financial Planning Week 2019. As some of you may not have been able to attend, we thought it might be useful to revisit the 6 key steps of Financial Planning that were covered during our sessions. Whether Financial Planning is a completely new concept to you, or you are well versed with what we do, it’s important to strip things back to basics.

1. Your vision and goals

So, the first step you should take when thinking about financial planning is surprisingly nothing to do with money. It’s all about you. Consider what you value most in your life, what you love doing more than anything else or if there is anything you would like to change. Whilst it’s forward-looking to see where you’re headed, it’s also important to look back at where you’ve come from and where you are today.

A discussion with a financial planner, that is also trained in life planning, can really help you properly understand what it is that you want from life.

2. Your money

You now need to think about what money you have, that will support your goals. We’re not talking about buying shiny things, but paying for comfort, security and experiences. What do you have, owe, earn and spend? And how might this change in the future?

3. Is there enough?

What we’re trying to find out from the information that you’ve gathered about your wealth, is whether there is enough to be able to meet all the goals on your wish list.

Understanding the shape of your wealth over the very long term can be quite complicated to calculate. As professionals, we use bespoke tools to forecast wealth and test out different scenarios easily. It’s not impossible to do this on your own to get a rough idea, but it is certainly a lot more difficult than letting the experts help.

4. Your financial plan

Firstly, we look at where you can reduce unnecessary costs. The most substantial costs to be saved will probably be those that you pay out of your pension and investment pots, and against your mortgage.

Where things start to get a bit trickier is thinking about how to reduce tax. Again, this is where substantial savings can be made. These make a very big difference, both short and long term.

As part of your plan, you should also think about whether you can improve the returns you have on your investments and pensions while taking a sensible amount of risk.

It’s also important not to overlook stress testing your plan, to make sure it can sustain any unexpected changes ahead. Developing a contingency plan for these possibilities is essential, because for most of us having security is incredibly important, and the idea of suddenly not having enough money is a terrifying one.

5. Make it happen

Having put together the framework of a financial plan, step five is to make it happen.

It sounds simple, but what often happens is that all the effort is put into analysing what you have, your budget and where it all goes. Then, when it all gets a bit difficult, you agree to pick up on it next week and it slips down the list of things to do.

Our advice would be to have a plan that you can apply step-by-step. Not everything needs to be done on day one, but you should have a structure. Part of that should be that you have a chat about your plan once a week or once a month for the first few months so that it doesn’t drift, and all the actions get dealt with.

6. Review your plans

Having applied your financial plan and put everything into action, you can sit back and relax right? Not quite. We recommend reviewing the whole thing at least once a year. Things change. You get a pay rise, your costs go up, you decide to move to a new house. What about if you’re on sick leave, or you receive an inheritance. Things change and they keep changing. And each time anything substantial happens, you should go back and review your plan.

Live better

For us, financial planning is about much more than finding the best investment returns. It’s about feeling in control of your wealth and what it enables you to do.

We believe that having money shouldn’t be a goal. It’s what that money does for you that is important. It enables you to have the lifestyle you want, to provide for your family and to have meaningful experiences.

If you would like any help with your financial planning, or you would like to discuss any aspect of this article, then please get in touch with us now and speak to one of our financial planners.