7 Steps of Financial Planning (2024)

It’s time to focus on financial fitness. By developing a financial plan or evaluating your current strategy with the support of AAFMAA Wealth Management & Trust LLC (AWM&T), you’re one step closer to ensuring that your finances align with your desired future.

Start Your Year Off Strong with These 7 Steps:

1. Establish Goals

To begin, ask some questions about your future. Where do you see yourfamily in 10 years? What does retirement look like? Will you travel, own multiple homes, buy a boat, help grandkids with college, or invest in a classic car? Write down your goals and structure them through the S.M.A.R.T. method, which means your goals are Specific, Measurable, Attainable, Relevant, and Time-based.

2. Assess Risk

Risk tolerance is the degree of variability in investment returns that you are willing to withstand in your financial plan. Risk tolerance is unique to you and considers financial goals, time horizon, age, life cycle phase, and current economic and political conditions. Although you may identify as fiscally conservative, risk-averse, neutral, aggressive, or risky, it is important to match those terms with numbers. Our free risk assessment tool quantifies your acceptable levels of risk and reward.

3. Analyze Cash Flow

It’s crucial to understand your cash flow — the movement of money in and out of your accounts. Determine where the money is going and how much you spend on a monthly and annual basis, then conduct an analysis. Determine which costs are essential and which are discretionary. Often, you’ll find room for improvement.

4. Protect Your Assets

It’s important to have the appropriate insurance tools to protect your assets. Conducting a simple net worth exercise helps identify what to insure and how much insurance is needed. This figure is a starting point for determining the appropriate amount of coverage to hold in a Personal Liability Umbrella Policy. You’ll also want to consider term or permanent life insurance (whole life, universal life, and variable universal life) and long-term care coverage.

5. Evaluate Your Investment Strategy

When it comes to investment strategy, consider whether you are active or passive. An active investor believes the markets are inefficient and needs to actively trade to achieve above-average market returns. A passive investor believes the markets are efficient, and therefore, is comfortable buying and holding.

6. Consider Estate Planning

Estate Planning will be unique to each family’s situation, and the conversation is essential. Some key items include:

  • A Letter of Instruction or Testamentary Letter
  • Will
  • Trust
  • Durable General Power of Attorney
  • Durable Power of Attorney for Healthcare
  • Advanced Medical Directive

7. Implement and Monitor Your Decisions

The final step to financial fitness is implementing and monitoring your decisions. AWM&T Relationship Managers can assist you in evaluating your goals, assessing your risk tolerance, and refining your savings and investment strategy. Additionally, we provide a complimentary portfolio review to determine your strongest investment plan and vehicle, personalized to your family’s needs.

AWM&T: Your Choice for Financial Fitness

Financial preparedness is the key to long-term success, and the AWM&T team is here for you. Make sure your finances are fit and ready to serve you well by connecting with an AAFMAA Wealth Management & Trust Relationship Manager at 1-910-307-3500 or emailing wealthmanagement@aafmaa.com.

7 Steps of Financial Planning (2024)


7 Steps of Financial Planning? ›

Step 7. Revise and Update Your Financial Plan Over Time.

What are the 7 steps of the financial planning process? ›

7 Steps of Financial Planning
  • Establish Goals.
  • Assess Risk.
  • Analyze Cash Flow.
  • Protect Your Assets.
  • Evaluate Your Investment Strategy.
  • Consider Estate Planning.
  • Implement and Monitor Your Decisions.
  • AWM&T: Your Choice for Financial Fitness.

What happens in step 7 of the financial planning process? ›

Step 7. Revise and Update Your Financial Plan Over Time.

What are the 7 key components of financial planning? ›

A good financial plan contains seven key components:
  • Budgeting and taxes.
  • Managing liquidity, or ready access to cash.
  • Financing large purchases.
  • Managing your risk.
  • Investing your money.
  • Planning for retirement and the transfer of your wealth.
  • Communication and record keeping.

What is financial planning answers? ›

Financial planning enables a business to determine how it will afford to achieve its objectives and strategic goals. A business typically sets a vision and objectives, and then immediately creates a financial plan to support those goals.

What is financial planning and its steps? ›

It involves chalking out a plan listing all your future goals and estimating the capital required for their completion. You then plan out the financial means to attain them. It may involve saving, investment, and administration of funds, among others.

What is the basic step for financial planning? ›

Assess your financial situation and typical expenses

An important first step is to take stock of your current financial situation. Even if you're not where you'd like to be, be honest with yourself about the income you're currently generating, savings you've accumulated and your general spending habits.

What are the three S's for financial planning? ›

The Three S's
  • Saving. The methods for teaching money lessons have certainly changed. ...
  • Spending. A budget is an important financial tool that can teach children how to manage money responsibly. ...
  • Sharing.
Nov 18, 2022

What are the seven finance functions processes? ›

It checks whether the activities are prolific and are in line with regulations. The seven popular functions are decisions and control, financial planning, resource allocation, cash flow management, surplus disposal, acquisitions, mergers, and capital budgeting. Give examples of finance functions in excel?

How many steps are now in the financial planning process? ›

They agree to a Scope of Engagement for financial planning that includes all seven steps of the financial planning process.

What is the 10 rule in personal finance? ›

The 10% rule is straightforward: it recommends that you put 10% of your income toward savings and investments ahead of other expenses or goals. That way, you can make sure you keep savings and build a strong base for your long-term financial security.

What are the 6 parts of a financial plan? ›

Six Areas of Financial Planning
  • Cash reserve levels.
  • Cash reserve strategies.
  • Debt management.
  • Cash flow management.
  • Net worth.
  • Discretionary income.
  • Expected large inflow/outflow.
  • Lines of credit.

What is financial planning worksheet? ›

The five components of the Financial Planning Worksheet are: Net Worth Statement, Income, Budget or Spending Plan, Financial Health Assessment with Action Plan, Debt Destroyer, and Financial Links. Hands-on practical application of the FPW is part of the case study assignments.

What are the key questions financial planning must answer? ›

The key questions financial planning must answer are: What specific assets must the firm obtain in order to achieve its goals?, How much additional financing will the firm need to acquire these assets?, How much financing will the firm be able to generate internally (through additional earnings), and how much must it ...

How to grow financially? ›

7 steps to financial stability
  1. Invest in yourself. Having further education, more knowledge, and required skills for work can support your career advancement. ...
  2. Make money from what you like. ...
  3. Set saving and expense budgets. ...
  4. Spend wisely. ...
  5. Set emergency fund. ...
  6. Pay off debts. ...
  7. Plan for retirement.

What are the 6 strategies of financial planning? ›

The Financial Planning Process
  • Step 1: Set Goals. While this seems pretty basic, this step often gets overlooked. ...
  • Step 2: Gather facts. ...
  • Step 3: Identify challenges and opportunities. ...
  • Step 4: Develop your plan. ...
  • Step 5: Implement your plan. ...
  • Step 6: Follow up and review yearly.

What are the 10 steps in financial planning? ›

Financial Planning Process
  • 1) Identify your Financial Situation. ...
  • 2) Determine Financial Goals. ...
  • 3) Identify Alternatives for Investment. ...
  • 4) Evaluate Alternatives. ...
  • 5) Put Together a Financial Plan and Implement. ...
  • 6) Review, Re-evaluate and Monitor The Plan.

What are the 3 rules of financial planning? ›

Finance experts advise that individual finance planning should be guided by three principles: prioritizing, appraisal and restraint. Understanding these concepts is the key to putting your personal finances on track.

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