Financial Planning – 7 Easiest Ways To Create A Financial Plan

Table of Contents


An Image showing financial documents
Source : Photo by Tiger Lily

To manage your finances, you must approach financial planning in a systematic manner. There are 7 important steps to financial planning.  As many feel that financial planning is complex, it is not. You do not require an expert to create a financial plan for you. With some determination and the right tools, you can create your own financial plan.

The average yearly pension ranges between $9,262 and $22,172. According to the BLS, “older families” spend around $45,756 each year. Fewer than 1% of Americans retire before the age of 50.

If that’s the case, people need to create a sound financial plan to enjoy their post-retirement days happily. Surprisingly, many people fumble with their financial goals. This article will look at how you can create a financial plan in 7 easy steps. Let’s check it out. 

What Is A Financial Planning?

Financial Planning means “A detailed picture of your current finances, financial goals. Or it can be any plans you’ve made to reach those goals.” In simpler words, financial planning is a template of your expenses, income, and desired goals you wish to achieve. Basically, the central concept is to divide the money into various expenses such as rent, school fees, home bills, and so on. While you invest some of your income in short-term and long-term savings choices.

Financial planning is a continuous cycle of identifying financial objectives, arranging those objectives. Thus, making a plan on how to achieve them. The differences in age, lifestyle, and financial assets may cause a financial plan to vary over time. Eventually, the financial planning process stays the same. Individual financial planning requires analysis and suitable actions. Therefore, it is also much easier to track the success of your financial planning. Overall, this will help you reach your long-term financial goals. Also, it is critical to ensure that your financial strategy continues to achieve both current and plans

Alexander Hamilton

The History of Alexander Hamilton 

President George Washington ($1), Abraham Lincoln ($5), Andrew Jackson ($20), and Ulysses S. Grant ($50) are all printed on money. But another person wasn’t a great politician but was still featured on the US currency. He was none other than “Alexander Hamilton.” 

The United States saw a huge downfall after the American Revolution. America’s then-president George Washington appointed Alexander Hamilton as the Treasury secretary. He was born in the West Indies to a single mother who worked as a shopkeeper. Regardless, he learned his first economic ideas from her before working as an intern for a vast enterprise. From early roots, Hamilton became the primary advocate of a modern capitalist economy in the early national United States.

Hamilton had robust ties with many influential people. It comprised Washington and a network of significant New York merchants and financiers. He married Elizabeth Schuyler in 1780. She was from a wealthy Hudson River valley property holding family. Thus, it strengthened his relations with New York’s wealthiest leaders. His creative financial tactics eased the Confederacy’s fiscal issues. It also benefited an economic elite with which he had close relationships.

3 Key Elements In Alexander Hamilton's Financial Plan

Image showing money and calculator
Source: Photo by Karolina Grabowska

Alexander Hamilton’s Financial plan includes three main steps.

  1. The Debt problem: The first concern Hamilton solved was the problem of “Public debt.” The US government had taken so much debt during the revolution that paying it back was not taken in a serious manner. By the late 1780s, the value of public security got deducted to a smaller fraction. And that’s where Hamilton took the first step. He also issued a dauntless proposal in the session. It stated that the federal government must pay off all the state confederations at total value. Hamilton advocated for a “MERCANTILIST” economic strategy in the United States. Thus, it would defend American industries by providing direct government SUBSIDIES (business giveaways) and TARIFFS (taxes on imported goods). This protectionist strategy would assist young American manufacturers in competing with low-cost European imports. It would also improve the soundness of the new central government. 
  2. Liberating from British control: Hamilton’s main goal was for the new nation to be free of England. Historically, the American economy relied on large-scale Agricultural Exports to pay for the import of British Manufactured Goods. Therefore, he recommended supporting America’s emerging industry. High tariffs, government subsidies, and government-funded transportation upgrades would protect American enterprises from competition from the United Kingdom and other countries.
  3. Establishing a new bank: The next bold move that Hamilton made was by announcing a new central bank called the “Bank of the United States.” It created an institution that would stabilize the national economy. It will also create a strong national currency. But, it faced too much opposition in the end. With the support of George Washington, it established its first headquarters in Philadelphia.

Why Is Financial Planning So Important In Today’s World?

Financial planning is important to ensure proper inflow and outflow of funds. Here are 3 reasons why financial planning is important in one’s life.

  1. To fight Inflation: People used to purchase 1g of gold for $0.98 back in the 1950s, but the price of gold has now soared to $57.421. Not only that, but the prices of other commodities have also reached an all-time high. Inflation is the gradual rise in the cost of goods and services over time. And if you’re not careful, it may quickly deplete your money. You may prevent inflation by investing in assets that provide higher returns over time. However, financial preparation is important for this.
  2. To create a contingency fund: A contingency fund is a kind of emergency fund you make for avoiding any sudden risk in the future. For example, In early 2020, Your budget was doing well and suddenly the covid situation arose. Restrictions got imposed and your salary got cut off by 50%. On top of that, you have a list of expenses to pay off. What would you do? If you had extra savings or a contingency fund kept aside. You could have easily waved off the expenses. 
  3. To create a retirement plan: Following the online world, you know that computer speed is proportional to work pressure. This increases your work pressure at your job. That’s why individuals choose to retire in their early 40’s or 50’s. Apart from these advances in medical sciences and technology, life expectancy has risen to 70 or 80 years. It means you have around 30 years of retirement life with increasing costs and medical bills. To tackle this, it is important to plan your retirement days now itself.  

Financial Section Of A Business Plan

Image showing a tax return form and 2021 planner on pink surface
Source: Photo by Nataliya Vaitkevich

These are the steps every business should keep in mind while drafting a financial planning template. These are listed below;

  1. Sufficient funds : To plan your expenses, you need to have enough funds in your bank account to pay your bills. Major multinational corporations or organizations would obviously have them. If not, you will have to arrange funds. You will assess corporate procedures and strategies before implementing them. For instance, a business improvement target will demand tools and techniques. This ensures easy tracking and controlling of the desired company improvements.
  2. Check the company’s mission, vision, and objectives : You should align your company’s vision, mission, and goals with a team. Corporations or organizations would need that the most. Yet, you may immediately learn that you will lose if you do not have a correct guiding direction. These are critical financial planning objectives for humans. Once revenue gets generated, it will grow your business. It will, in turn, lead to a good business financial plan.
  3. Define an Organization’s Capital Structure : Capital structure is the composition of an organization’s capital. This includes preparing for the debt-equity ratio for the funds needed for short-term and long-term purposes.
  4. Optimize the funds: You need to use your funds to achieve the best results. For example, if you are investing your funds in a new machine, keep checking the resources used in it. Also, check that resources are not wasted and used efficiently. Avoid financial overspending: It’s human psychology that humans tend to spend more on the expense side once revenue gets generated. Lack of funds can lead to delayed payments, increasing the organization’s debt.
  5. Profit Maximization : If we peep into the economic theory, it states that the marginal cost (MC) equals marginal revenue (MR). Or, when the MR curve surpasses the MC curve, profits get maximized.

Types Of Financial Planning

Now that you are aware of what financial planning means, let’s have a check at the various planning options available. Here are some listed below.

  1. Insurance planning : Insurance is like headgear to protect you from the risk arising in the future. Long-term insurance coverage is a critical component of financial planning. Well, it might risk your other financial objectives as well. Individual lifestyle influences insurance planning. Before purchasing any insurance, you should conduct a background study.
  2. Retirement planning : If you are working in a 9-5 corporation, you will have to retire one day or the other. It would be best if you started your retirement planning now itself. It’s only then that you can tackle all the inflation bubbles and raise your standard of living.
  3. Investment planning : As Miguel Cervantes quotes, “Don’t put all your eggs in one basket.” Investment is the need of the hour. Diversification of funds is a crucial element of investment. With the help of your financial advisor or else, you can invest in the investment options. These include Investment in stocks, gold, the forex market, bonds, digital currencies like bitcoin, etc.
  4. Tax planning : A proper tax strategy could assist you in maximizing your financial savings. Countries provide a variety of perks and exemptions to taxpayers. At the end of the year, you can reap the benefits of exemptions to reduce your taxes.
  5. Real Estate Planning : If you have wealth that’s staying idle, you should go for investment in properties. Depending on where you live, you have another money set to meet your costs. You should also make some extra money on the side. Demand is usually vital in urban areas after witnessing the American Revolution. Income is more significant in centers or towns with colleges and universities.

7 Steps To Financial Planning

Being a professional financial advisor, you need to create a sound plan. Here are those 7 steps.

  1. Read your client : To create your client’s financial plan, you need to know everything about him. It includes income, expenses, debt, goals, savings, assets, health or life insurance, etc.
  2. Identify goals : Ask your client whether they have their own set of objectives to achieve. For example, Mr. Smith wants to have a lump sum of $6000 on his retirement. Referring to the investor’s mentality, you have to plan.
  3. Analyze client’s financial condition : The financial planner will review other legal papers. It includes the client’s financial condition, current cash flow statement, debt, insurance.
  4. Presenting suggestions : You can put forth suggestions after analyzing the client’s financial situation. For example, if Mr. Smith had a recurring hotel expense, it could get diverted in stocks. In this way, he would yield much better results at this stage.
  5. Creating the strategy : You need to form the financial plan based on your accessed data. Your financial planner will discuss these ideas with you. You should ensure that your client understands all stocks and why they are made.
  6. Implementation of the plan : Once both (client and you) have agreed to this new plan, it can be implemented. It’s a financial adviser job to fill your application form. Also, double-check the information on the forms to ensure you provide nothing.
  7. Monitoring the process : The last step in financial planning is reviewing and tracking the progress. At regular intervals, there must be a check whether everything is going in a perfect manner. You must also engage in meetings with your client. Accordingly, you can update, change and review your plan.

Is There A Need For A Financial Consultant?

It is entirely up to you whether or not you require the services of a financial counselor. However, if you are a newcomer or a beginner, you will undoubtedly want the assistance of someone who can help you plan your financial goals. You would have difficulty comprehending the legal authority or provisions of your investment papers. Your mental strength will make it challenging to assess risk or establish remedial actions.

You will be unsure about your financial decisions; it is best to seek advice first. If you don’t have time to examine risks, develop strategies, or design investment plans, that’s where you will need a professional. At times, you know that it’s essential, but still, you be a bit scared to take action regarding your finances. That’s when it’s recommended to assist a financial adviser or planner that will help you with your financial goals.

Career opportunities In Financial Planning And Analysis 

There is a massive demand for jobs in the field of financial planning and analysis. According to BLS, the percentage of the number of financial analysts will grow by more than 6% through 2024. One of everyone’s main worries in the financial world is how to manage their wealth. This makes a profession like financial planning as important to society as anything else.

Yet, a question arises, Is it a good option to choose financial planning as a career? As you read further, all your questions would be answered.
There is a huge income potential for those individuals who want to become financial planners. A financial planner in the United States may earn a base income of $62,079 per year on average, according to Glassdoor. However, it is vital to highlight that the majority of a financial planner’s annual revenue comes from fee-based planning services and commissions. According to the Bureau of Labour Statistics(BLS), a financial planner’s salary varied from roughly $41,000 to more than $200,000.

Consumers are frequently distracted and confused about whether investments or insurance are right for them. The most important duty of a financial adviser is to educate customers so that appropriate decisions may be made. A client’s financial success typically corresponds to success for the client’s financial advisor. Financial planner gets royalty from their customers if their advice works wisely. If the plan of the financial adviser works well, the client will always choose him as his financial planner in the future.


Well, it is your financial strategy and objectives that are at risk. As a result, the investor’s responsibility is to ensure that their economic strategy is on track. Also, keep in mind that financial planning is a dynamic process, not a static one. Your financial condition, desires, and goals may vary over time. As a result, you should meet with your financial planner or adviser frequently to verify that your portfolio is doing effectively and that any changes to your financial circumstances, objectives, or aspirations are adequately represented in your financial plan and implemented.