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Financial Planning Process

Planning Process

Personal finance is not in formal education in many countries. People may go to college to study accounting or business management, however, personal finance is different from them even some concepts are similar.

Certified Financial Planner Board of Standards, or known as CFP Board, confers financial planner professional certification across America which states 7 steps in financial planning process. I highlight the key elements in the process which is very good for people starting their personal finance journey.

The 7 steps of financial planning process are –

  1. Understanding the Client’s Personal and Financial Circumstances

  2. Identifying and Selecting Goals

  3. Analyzing the Client’s Current Course of Action and Potential Alternative Courses of Action

  4. Developing the Financial Planning Recommendation(s)

  5. Presenting the Financial Planning Recommendation(s)

  6. Implementing the Financial Planning Recommendation(s)

  7. Monitoring Progress and Updating


Let me explain the important elements for an individual starting their financial planning journey based on the steps above.


First of all, you should know your circumstances very well. Probably many of you know well of your income and expenses. But it is only one side of the coin. You also need to evaluate your financial needs based on your age, health, risk tolerance level and family circumstances.

Once you are clear of all these factors, next you can think about what is your goal, that is, why you need to have financial plan.

It’s probably having emergency fund, buying a house, kids college education, retirement or many goals that you want to achieve. You need to prioritize the goals and ask yourself, how long do you expect to achieve your goals?  In general, the longer of the time horizon to achieve your goal, the more options for you to do that.

Next, you need to review your current personal finance strategy or actions can help you to achieve your financial goal. For example, you have $1,000 net saving each month. You just save all of the money into a checking account.  Your goal to buy a flat in 3 years. Then, you can evaluate whether your current financial goal is achievable based on the information.


After reviewing your current course of actions and you find it’s impossible to achieve your goal, you should look for alternatives.

Here I would like to highlight the purpose of financial planning. It is the process to maximize your potential to achieve your financial goal. In other words, financial planning bases on various assumptions and estimates to project whether your goal can be achieved in the period you expect.

Based on the assumptions and estimates, you derive several alternatives to achieve the goals. In selecting different alternatives, you are better to consider your age, health, risk tolerance level and family circumstances. For example, a young person who is single and no financial burden, he or she can accept higher risk (or more volatile) investment. But it is not the same for a person with young kids and mortgage.

Identifying what financial products in your course of action, you then need to implement your financial plan. Remember to monitor your actions on a regular basis. It is not only reviewing your investment performance but also your monthly cash flow, asset return and any change of your personal and family circumstances.

If no significant change on all assumptions and estimates set before, you can keep your financial plan but if there is a big change, such as illness or losing a job, you need to go through the process again and revise your plan or even the goal


In order to help you, we invite many personal finance experts contributing their views and experiences so that you can build your own financial planning strategy to maximize your potential achieving the goal.


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