financial planning process
The six-step professional framework for comprehensive financial planning — gather data, analyze, develop plan, implement, monitor, and update.
Example
“Following the financial planning process helped them identify a $400,000 life insurance gap.”
Memory Tip
SIX STEPS — gather, analyze, plan, implement, monitor, update. Repeat.
Why It Matters
Understanding the financial planning process helps you create a structured approach to managing your money rather than making random financial decisions. It ensures you address all aspects of your financial life including savings, investments, insurance, and retirement in a coordinated way.
Common Misconception
Many people think financial planning is only about investing or saving money, when in reality it is a comprehensive process that covers budgeting, debt management, tax strategy, and estate planning. They often skip important steps like monitoring and updating their plan, assuming a plan made once will work forever.
In Practice
A 35-year-old earning 60000 dollars annually might gather data on their 15000 dollars in debt and 8000 dollars in savings, then analyze their 2000 dollar monthly expenses. They would develop a plan to pay off debt in three years, build an emergency fund, and start retirement contributions, implement it by automating transfers, monitor progress quarterly, and update it annually or after major life changes.
Etymology
From the CFP Board standards — a structured approach to financial planning.
Common Misspellings
Get a free financial plan from a real advisor
Related Terms
More in financial planning
Other financial planning terms you should know
See Also
Need financial definitions?
Clear definitions for 2,500+ finance, insurance, and investing terms.