Financial Planning 101: What Are the Steps Involved

Kristian Borghesan


The reality of it is that most of us are similar when it comes to our money. We want to find a sure way of managing the relationship we have with our money. We want to find a better way to manage our money. We also want to gain clarity on the steps we need to take to improve our financial well-being. Having a financial plan might be the solution to these. Most people hesitate when it comes to building a financial plan because it can feel overly complex or expensive. But it doesn’t have to be. As we break a plan down into each one of the components, you may realize it isn't so complex after all. You may even start to get a better understanding of the benefits of financial planning. Let’s get started by breaking down some of the necessary steps to preparing a complete financial plan.

1. Assess Your Current Financial Situation

2. Develop and Create Your Financial Goals

3. Prioritize Your Next Moves and Actions

4. Evaluate Your Alternatives and Options

5. Update and Revise Your Financial Plan

​This article may contain affiliate links. Affiliate links are a form of receiving a commission should you purchase anything from the links selected. The commissions earned help to keep this website running. Please read the Disclaimer page for more information. 

1. Assess your current financial situation

One of the first things a financial plan does for you is provide a snapshot and assessment of your current financial situation. By taking a look at all of the areas of your current financial standing such as your income, savings, living expenses, debts, and risk management, your plan will start to formulate a picture of where you currently stand. Really, it’s impossible to create a financial plan without any of this information. This is all used to determine your current path and future trajectory. This first part is where you begin building the foundation for all of your future financial planning activities.

2. Develop and creating your financial goals

Once you’ve created your financial overview, it’s important to take this broad assessment and create specific goals based on where you want to be and the types of things you want to achieve. One of the key things to keep in mind when setting your financial goals is making sure that they are both specific and personal. While other people can and will influence your financial goals, you need to determine for yourself which goals align with where you want to be. Financial goals can include some of the following: buying your first home, building an adequate emergency fund, saving for an engagement ring, creating a savings account for annual vacations, and increasing your savings rate to save for retirement. Financial goal setting shouldn't be a one-and-done thing. As your situation and financial outlook evolves, it’s important to keep your goals aligned with your values.

3. Prioritize your next moves and actions

Now that you’ve assessed your current financial situation and created a few financial goals, it’s time to map out and prioritize the actions you need to take in order to get yourself closer to reaching each one of your goals. Let’s take a look at an example below. You’ve determined that you have zero savings for a rainy day, and one of your financial goals is to start building an emergency fund. By identifying both of these things, it’s now easy for you to start making this a priority and to start working towards building up your emergency savings as your next step. It’s also equally important to understand the consequences of your financial decisions and how they impact your financial plan. Again, using the same example as above. By focusing on building your emergency fund, you will need to be that much more aware of your savings rate and stay on top of your spending habits so that you can add more savings to your emergency fund each month.

There are always opportunity costs involved during financial planning, which is why it’s so critical to make sure that your goals are set, and your next steps are mapped out and prioritized.

Prioritizing all the financial moves that you need to make can be difficult. Rather than doing this on your own, financial planning services like Savology can eliminates the guess-work and help automate this for you.

After building a free financial plan at Savology, you will receive tailored Actions Items so that you know exactly what areas you need to focus on and how you can prioritize your next moves.

4. Evaluate your alternatives and options

You’ve assessed your finances, created your goals, and mapped out your next moves. Now what? Now it’s time to start evaluating the best alternatives and options for those steps you’ve started to prioritize. In other words, you’ll need to do your homework to determine the best solutions to help you execute those steps. Again, keeping with the example of building your emergency fund. You’ve determined that you need to prioritize and open a high-interest savings account as a way to start building your emergency fund for you and your family. Now it's time to do a little bit of research or consult with professionals to determine what your best option is. You’ll want to explore all of the alternatives to determine things such as:

  • Who are the top providers offering high-interest savings accounts?

  • What are the costs of opening and managing these accounts?

  • How long will it take to open an account and transfer funds into them?

  • How long will it take if I want to pull the money out and use it?

  • Are there any repercussions of pulling the money out of these accounts?

  • Are there any other limitations or notable features of these products?

By having this baseline knowledge, you’ll be able to make the best informed decision you can and feel more confident when you do. Remember, financial planning involves consistent decision making. You will have a lot to consider. The first four steps mentioned above will help you make these financial decisions with confidence and certainty.

5. Update and revise your financial plan

Financial planning is an always-on, ever-changing, and never-ending process. As long as you’re making money, managing money, or spending money, financial planning should play a very important role in your life. Once you’ve created your plan, it’s equally as important to stay on top of it by regularly updating it to maintain it and make sure that it stays aligned with your goals. This couldn’t be more true when it comes to significant life events or changes that can impact your current, or future financial situation. Some examples of this include: having a baby, taking on your first mortgage, losing your job due to layoffs, or even getting into an accident where you need to take time off work. By reviewing and updating your financial plan every 3-6 months, you’ll be sure to stay on top of your goals and be well-prepared for financial success.

The benefits of financial planning

By now, it’s likely easy to see that financial planning, when done right, and when committed to can have many positive impacts on your life. By taking the time to build a financial plan, you’ll gain some of the immediate benefits which can include:

  • Increased chance of reaching your goals and retiring on-time

  • Increased confidence and feeling better about your money

  • Having clarity on your finances as well as other areas of your life

  • Feeling motivated, inspired and accomplished

  • Reduced stress and anxiety when it comes to worrying about the unknown

  • Better satisfaction with your personal relationships

  • Improving the overall quality of your life

Getting started with financial planning

While financial planning has traditionally felt overwhelming, complicated, and stressful, it certainly doesn’t have to. In fact, financial planning can be a lot easier than most people think. Regardless if you already have a financial plan, or if you’re looking for the right place to get started, you’re in luck. Savology is a free planning platform helping people just like yourself reach financial success by providing free financial planning in just 5 minutes. You’ll also receive personalized and prioritized action items, to help with those important financial decisions, and a holistic report card, to give you a current snapshot of your financial well-being, so that you have a clear indication on what areas you need to improve and how you can start improving today.

Savology has created the most accessible, affordable, and actionable financial plan on the market.  Regardless of the current state of your finances, Savology provides you with valuable insights into your whole financial life including insurances, debt, retirement planning, estate planning and more.


  • Instagram - Black Circle
  • Pinterest - Black Circle
  • Facebook - Black Circle
  • YouTube - Black Circle

© Dollar Otter and, 2019.  Unauthorized use and/or duplication of this material without express and written permission from this site's author and/or owner is strictly prohibited.  Excerpts and links may be used, provided that full and clear credit is given to Dollar Otter and with appropriate and specific direction to the original content.