The Ultimate Financial Planning Guide: Do It Like the Pros in 6 Steps

Take charge of your money with some DIY financial planning.

It’s often been said that no one plans to fail, they just fail to plan. This is particularly true when it comes to your finances. Financial planning — the process of managing short- and long-term finances — can mean the difference between achieving your financial goals and living paycheck to paycheck now and in the future.

In this guide, you’ll find the steps to take to create your own financial plan:

Steps to Building a Solid Financial Plan

The Financial Planning Standards Board recommends a six-step process for professionals to follow when developing a financial plan for clients. This process involves the following:

  • Establishing a relationship
  • Collecting information
  • Analyzing the situation
  • Developing a plan
  • Presenting the plan to clients
  • Reviewing and modifying the plan as needed

With some modification, you can use these steps as a model for creating your own plan.

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Learn: What Is a Fiduciary Financial Advisor?

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Step 1: Set Your Financial Goals

It may be tempting to rush headlong into figuring out where your money is going and how much you can save. But before you get to that, take some time to think about what financial goals you want to reach. Maybe you want to buy a house or fund your children’s college education, even if you don’t have those children just yet. You may want to retire early and spend time traveling. If it’s important to you, write it down.

Step 2: Figure Out What You Have To Work With

With your goals in place, the next step is to determine what you have (your assets) and what you owe (your liabilities).

Your Net Worth

Subtract your liabilities from your assets to calculate your net worth. Assets are anything with monetary value, including real estate, bank accounts and stocks. Liabilities include your mortgage if you have one, your car loan, your student loans and any other debt you might have. Don’t include rent, utilities or other ongoing monthly costs — those are expenses.

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Your Income

Write down the amount of income you have coming in. If being precise is important to you, use your gross income (before any deductions). When you calculate your expenses, you’ll need to account for taxes and anything else that is taken out of your paycheck, like health insurance and retirement plan contributions.

Your Expenses

Get out your bank and credit card statements and categorize everything you spend. This includes monthly bills for your rent, car payment, student loan payments, utilities, phone service and the like. It also includes other things you regularly buy, such as food and clothing. Be sure to add on annual expenses, such as vacations.

Your Cash Flow

Your income should be greater than your expenses. If it’s not, it’s time to cut back on what you spend or find a way to pick up more income. Create a realistic budget that suits your lifestyle and gives you room to work toward your financial goals.

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Step 3: Put a Price Tag on Your Goals

In the first step, you identified goals you want to achieve in the future. Now you’ll need to dust off that crystal ball and try to figure out how much you’ll need to save to accomplish all you want to do. This is not an exact science, but estimating and planning will get you closer than wishing and hoping.

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The tricky part here is figuring out how much things will cost in the future, but there are some tools that will help you out. If one of your goals is paying for college for your children, the College Board offers a cost calculator. Similarly, you can use a retirement calculator to estimate how much money you’ll need to have saved to maintain your lifestyle in retirement.

Step 4: Establish Short- and Long-Term Plans

Your savings plan should vary depending on the amount of time you have to save and the amount of risk you’re willing to take. Divide your financial objectives into short-term goals that you can meet in less than three years, mid-term goals that you can achieve in three to 10 years and long-term goals that take longer than 10 years to reach.

Liquid investments are a good choice for short-term and some mid-term goals, including saving for an emergency fund. These include savings and money market accounts, Treasury bills and certificates of deposit. The longer you have to save, the more risk you should be able to take. Long-term investments include stocks, mutual funds and stock exchange-traded funds.

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Step 5: Take Action

After you create your financial plan, it’s time to put it into action. Follow the budget when paying bills each month. Pay down debt. Set up savings accounts, open CDs and contribute to a retirement plan. Track your progress toward your goals through an app or on paper so you can see your plan at work and stay motivated.

Step 6: Review and Modify as Needed

Remember, your financial plan is a work in progress. Go back and revisit it at least once a year, or whenever something significant happens in your life. This includes marriage, divorce, the birth of a child, the death of a family member or job loss. Go over your calculations again and make adjustments where necessary.

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How To Get Financial Planning Help

Of course, you don’t have to do all your financial planning alone. Sometimes it’s worth the cost to hire a certified financial planner. Ask your friends and family for recommendations or check with professional organizations that maintain a database of their members. In addition, a variety of resources are available online through consumer advocacy groups and government agencies, including the Securities and Exchange Commission and the Consumer Financial Protection Bureau.

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This article has been updated with additional reporting since its original publication.

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About the Author

Karen Doyle

Karen Doyle is a personal finance writer with over 20 years’ experience writing about investments, money management and financial planning. Her work has appeared on numerous news and finance
websites including GOBankingRates, Yahoo! Finance, MSN, USA Today, CNBC,, and more.

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