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What Are the Six Steps in the Financial Planning Process?

What Are the Six Steps in the Financial Planning Process?

Having a solid financial plan can help you manage your finances wisely and steer clear of debts. This process is an important part of wealth management that can be addressed when you keep track of your finances. The process involves 6 key steps that revolve around evaluating your expenses, establishing financial goals, and working toward those goals in order to enjoy financial freedom and a stress-free retirement.

What Are the Six Steps in the Financial Planning Process?

In this article, Hagemann Wealth Management Services share their insights about the six steps in the financial planning process. Let’s take a look at them.

1.      Determine Your Current Financial Situation

The very first step in the financial plan process is to look at your current financial situation. Determine your living expenses, savings, income, and debts. Your financial planner will ask for your financial documents and determine where you stand financially. They’ll look at your assets, debts, and suggest the changes that need to be made for you to achieve your financial goals.

2.      Set Financial Goals

Setting financial goals is a great way to base a financial plan on. Your financial goals should be very clear and straightforward. Whether you want to pay off all your debts, build a retirement plan, or have certain amount of savings, your goals should be well defined. However, when setting financial goals, make sure they are realistic and achievable, considering your current income and financial situation.

3.      Consider Alternative Courses of Actions

Having a contingency plan is always a great idea so that you can have an alternative course of action in case your main plan goes wrong. When setting a financial plan, consider all the available alternatives and determine the best suited course of action for your situation.

4.      Evaluate Alternatives

After determining all the alternative courses of action, the next step is to evaluate these alternatives. You should evaluate these options to determine the consequences of your course of action, also known as opportunity cost. Opportunity cost is what you have to pay when you make a certain choice. For instance, paying your child’s tuition means letting go of your vacation plans. Decision making always involves a trade-off like this. Therefore, consider what you lose when choosing a certain course of action.

5.      Implement the Financial Plan

Once you’ve set your financial goals and weighed down all the alternative plans, you come up with a final action plan. This action plan would be directed towards achieving your financial goals in order or priority. Therefore, your goals should always be listed in the order of importance, so the financial action plan prioritizes your most important goal.

6.      Revisit and Re-Evaluate Your Financial Plan

Wealth management and financial planning is a continuous process. It needs re-evaluation to ensure that the plan is being followed and that the desired outcomes are achieved. If you are not achieving your financial goals, it’s time to revisit and revise your financial plan. Although you might not be able to determine what’s wrong, a financial planner can help you figure that out.

Get in Touch with a Professional Financial Planner to Devise Your Financial Action Plan

Without a financial action plan, wealth management is quite challenging and can make it almost impossible to achieve your financial goals. But our financial advisor in Illinois can help you make the right decisions and identify what you’re doing wrong. Reach out to us now to devise your financial plan.

Content and opinions in this material are for general information only and not intended to provide specific advice or recommendations for any individual.

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