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What Is The 7 Step Financial Planning Process? (And Why It Matters)

Financial planning is a diverse field, one that touches many different sectors. From communication to psychology to economics to human behavior and more, financial planning sits at an intersection of these ideas, combining them to help you achieve your goals. 

There are several ways to approach financial planning. Our approach centers around you and your unique goals. We work with you to devise a strategy that maximizes your financial resources and your lifestyle aspirations.

But how can we do that? How can we take this comprehensive view of your financial life and bring it to fruition? For us, that means exemplifying the CFP Board’s Code of Ethics 7 Step Financial Planning Process.

What is this process, and why is it essential for you? Let’s find out!

Why establish a planning process?

Our primary objective is to serve you to the best of our ability. We want to provide you with comprehensive, holistic services and help you align your finances with your values and lifestyle goals. The best way to do that is to engage with a proven system that challenges us and elevates our service offerings. 

To us, this means obtaining our CERTIFIED FINANCIAL PLANNER™ certification. As a CFP® professional, we undergo extensive training in critical financial planning areas as well as a rigorous ethics requirement ensuring that we act as a fiduciary or trusted agent with our clients throughout every phase of the planning process. 

The bottom line is that we want to serve you well, and this added certification helps us do that. The CFP Board created a 7 Step Comprehensive Financial Planning Process to guide CFP® professionals and their clients in a process that is honest, transparent, and comprehensive. Let’s take a look at each of these phases and how they impact you.

1. Understand your personal and financial circumstances

Money and lifestyle: you can’t have one without the other. This intersection is why we are passionate about combining your financial and lifestyle goals to create a cohesive, long-term plan. 

What does this mean in practice? We look at both your qualitative information like health, family life, life expectancy, and goals, and also the quantitative side like income, investments, and expenses. This information helps us get to know you and your partner together. We can start to answer questions like,

  • How do you and your spouse live?
  • Are you comfortable with your current financial landscape, or are there some strategic changes we can make?
  • How are your finances and lifestyle currently working together, and in what ways can that interaction improve?

We take this information and analyze it as we begin to build your financial plan.

2. Identify and select goals

We love goal-setting at Step by Step. Hearing what matters most to you will be the catalyst for your financial habits, decisions, and long-term planning. Here are some questions to get you thinking about your retirement goals:

  • How do you picture your retirement?
  • What does a fulfilling, meaningful life look like to you?
  • What are your critical financial milestones? (retirement dream house, putting grandkid through college, etc.)
  • What roadblocks currently stand in your way, and how can you overcome them?

Goal-setting is an extensive but exciting process. If your goal is to downsize to a smaller house close to family, we will need to set up your finances in a way that supports that vision. Building off of step one, we can help you select and prioritize what those goals will look like.

3. Analyze your current course of action

So much of financial planning is checking in and adjusting based on shifting goals and priorities. We want to make sure that you are heading in the right direction to achieve those goals we created together, which enhances both your financial and personal life.  

Likely there will be some areas in your plan that need adjusting. Perhaps you need to take better advantage of catch-up contributions to your 401(k) and IRA, or maybe you need to start planning for Medicare and health planning, or you might need to create a more robust tax planning strategy

The whole idea here is to maximize your potential to meet your goals. Our team will present you with a couple of different options so you can choose a plan that feels right for you.

4. Select the right recommendations

The step above allows us to work together and devise a strategy that will propel you forward. This stage is when we get to make that decision. Before selecting the right course of action for you, we look at a few specific elements:

  • The assumptions and estimates used to create the plan
  • The basis or the “why” of the recommendation
  • The timing and priority of the recommendation
  • Whether the recommendation is independent or needs to be implemented with another set of plans

This rigorous process helps lay out a detailed reason and explanation for each recommendation we move forward with. By engaging in this level of planning, we ensure that your financial plan fits in the context of your life and goals. 

5. Present the plan to you

This is the fun part! It is where we get to communicate with each other about your ideal recommendations and why we believe it will help you move in the right direction. In this stage, we walk you through our entire planning process, so you can see how we came to our conclusion and why we are passionate about pursuing certain recommendations. 

This step is collaborative and provides space where you can ask us questions, and we can start to piece together the particulars of your plan. In this stage, we might present the route we believe will be best for you to hit your retirement savings goal or a course of action for proactive tax planning or revamping your charitable giving. 

6. Implement your plan

It’s time to put your foot on the gas because this is the stage where things start to happen. Here, we work to implement the ideas that we discussed and your personalized recommendations for reaching your goals. 

We will talk about the specific recommendations we are implementing along with any corresponding responsibilities. That includes what our team will do, what we will need you to do, and also any third party. Before you leave this meeting, you will have clear expectations for what is to come. 

When our team is part of the implementation process, we will take further action to help you select and create a path forward that best aligns with your plan. 

7. Monitoring and updating

The 21st century is big on monitoring. There doesn’t seem to be any place that isn’t camera-secure from your house to a store to a restaurant, at least some sort of monitoring is taking place. 

You can think about this step like a home alarm system. We are watching out for your plans’ health and safety and will be ready to make any changes as your needs, goals, and priorities change. We work to monitor your progress toward your financial goals and recommend any changes should that need to happen. This way, we are up-to-date on your financial progress and can make proactive decisions to keep you on the right track.

Why this process matters to you

The CFP Board’s 7 Step Financial Planning process brings excellence to the planning process. As a CFP® professional, we know what it means to offer distinguished above and beyond service to our clients, and this planning process helps us do that. 

Are you ready to see the difference that this financial planning process can have on your situation? Schedule a call with our team today!