Financial Planning Process: How to Create a 5 Step Financial Plan


Financial planning Process refers to creating a plan or strategy to achieve the financial goals of an individual. Financial Planning Process itself is broader concept with number of topics under itself like budgeting, savings, investing, managing expenses, emergency fund, insurance, retirement planning etc. A financial planning process for one person can be different from other person, as every individuals financial situation and goal is different. Financial planning process is important to create a sense of happiness and living a financially free life by achieving the goals set by an individual.

Nothing can be more satisfying than living a life, where you are not worried about financial expenses as you already have a plan and have been regularly following it for years. It does take some hardships and discipline & you have to sacrifice lot of things to achieve your financial goals.

It’s difficult to follow a financial plan, but to achieve greater things in life you have to make sacrifices of many small things. Here, we are going to help you make a simple and impactful financial plan that will help you improve your financial situation and help you achieve your financial goals by following this plan.

How to do financial planning?

Financial Planning Process requires a disciplined and focused approach to follow the financial plan you have decided. It is not easy to decide ‘what to do’ and ‘how to do’, it requires a lot of research and motivation to decide your financial goals and create an effective plan.

We are providing you some basic steps to follow and consider in your financial plan, we have tried to make it simple and only considered the most important steps. So, here are the steps to make your financial plan.


Insurance should be the top most priority in every financial planning process. If you are the only earner in your family it becomes most important to get yourself insured. Insurance is important because if something adverse happens to you, then your family will not have to suffer financially. It is important to take a proper insurance coverage. So, now the question is which insurance plan to take ?, just take a term life insurance and health insurance that can cover your whole family. Only these two insurance plan are enough for you because in case you are not there term insurance can take care of your families financial future.

Health insurance is important because now a days medical expenses are very high and if you don’t have a proper coverage you may be forced to take a loan unwillingly. Also health related problems are on rise given today’s lifestyle. One major health related problem is enough to create a dent in your finances and you have to suffer financially and mentally due to that. So, better get yourself covered.

To know ‘how to select best term Insurance’ you check the link

Create a Budget & Track Your Expenses

Creating a budget can be very helpful in financial planning process, When you get your salary do make a plan on how you are going to spend it. Write on a diary the important expenses like house rent, grocery, bills, school fees and all the expenses that you cannot avoid. This will help you in managing your money better. Also keep a track on your expenses, as this will help you identify areas, where you are overspending unnecessarily. For this you can make a habit of noting down every expense done by you for a month or two, and believe me you will be surprised to see how you are spending on things which are not necessary at end.

You can cut on some of these expenses and start saving some money out of these expenses. It can be hard initially, but you have to make those small sacrifices to achieve something big as mentioned earlier it is difficult to follow the path of financial planning and achieve financial freedom.

Create an Emergency Fund

Creating an emergency fund can be very important and helpful at times when you are struck by a sudden financial emergency such as job loss or any other emergency where you require an amount for short period of time. Lack of emergency fund can force you take unnecessary debt. You should save at least 9 to 12 months of your monthly expenses as an emergency funds.

Start saving for an emergency fund from start, you can keep another account for accumulation of emergency fund. Don’t invest this emergency fund in risky investment options like stocks or some other assets as you may require it really quick, so keep this as liquid as possible. You can create a fixed deposit and keep it when your emergency fund is prepared.

Don’t take money out of emergency fund unless you really need to. If you have to do so try to fill the used part as early as possible. When your emergency fund is created. You will realise a sense of satisfaction in yourself and move a step closer to achieve your financial goals.


After taking insurance,  creating a budget, creating an emergency fund, next step in financial planning process should be investing. There are several options available for making an investment like stocks, mutual funds, gold, real estate, ppf etc. The best way to make an investment is goal based investment like retirement planning, children’s education and marriage planning, planning for a home etc.

You can invest according to your goal in different investment options available. Keep in mind not to invest all your money in one asset class and properly diversify your investment. Take the help of experts and make a proper investment plan that suits your financial goals.

Avoid Debt and Credit Card

The less debt you take the better it will be to achieve your financial goals. Avoid taking debts and limit your credit card usage. If you already have some debts try to finish it as early as possible, start by paying debt with high interest rate and finishing off it first. Credit card debt can cost you more as they charge you with high interest rate. So if you use your credit card regularly try to pay the outstanding amount within time to avoid unnecessary charges and interest.

Some debt are also good like housing loan, these are available at low interest rate and also you can get tax benefits from your housing loan. Education loan can also be good if you are taking it learn new skills or upgrade your knowledge as it can enhance your career growth.

Take a loan only when there is no other option. Try to avoid impulsive buying or buying things that are not important, or which does not add any value in your life.


Financial Planning Process can be done by following the steps given in this article. You should be determined and focused on your approach towards financial planning process, as it requires a lot of discipline and patience to achieve your goals. Also don’t hesitate to take expert advice wherever required don’t try to do things all by yourself. Try to learn and enhance your knowledge about finance. Remember it’s only your behaviour, patience and discipline will help you achieve your financial goals.

That’s all for now, Have a great financial journey.

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