I’ve spent years working with clients who felt overwhelmed by their finances. That’s why I’m sharing the 7 step financial planning process with you today.
This guide walks you through each stage of creating a solid financial plan.
You’ll learn what the CFP Board recommends and how to build a strategy that actually works for your life.
Here’s what we’ll cover: the official seven steps that financial planners use, how to set goals and track your progress, and ways to adapt your plan as life changes.
I’m not here to sell you anything. I want to give you clear, honest information that helps you take control of your money. Financial planning isn’t magic. It’s just a system that anyone can follow.
Let’s get started.
Overview of the CFP Financial Planning Process
The CFP Board created a structured approach to financial planning that helps both advisors and individuals create better financial plans.
Financial planning used to focus on selling products. The CFP Board changed that by creating a consistent process. The current seven-step model came out in 2019.
Certified Financial Planners must use this process. But anyone can benefit from it.
This framework works for people at any stage: young professionals, families, business owners, anyone going through life changes, and retirees. You can work with an advisor or do it yourself.
Either way, these steps give you structure and help you think systematically about money.
The 7 Step Financial Planning Process
Follow these seven steps to create a solid financial plan that grows with you.
Step 1: Understanding the Client’s Personal and Financial Circumstances
Start by getting a complete picture of where you are right now. Understand your values, attitudes, and risk tolerance.
Ask yourself: What matters most to you? How do you feel about taking risks with money?
Gather documents showing your complete financial situation: income sources, bank accounts, retirement accounts, insurance policies, debts, real estate, spending patterns, and tax returns. Use actual statements, not guesses.
Create a net worth statement listing everything you own and owe. Track your cash flow for three months to see where money goes.
Step 2: Identifying and Selecting Financial Goals
Break goals into three time frames: short-term (one to three years) like emergency funds, medium-term (three to ten years) like house down payments, and long-term (ten years or more) like retirement.
Write specific goals with dollar amounts and deadlines. Prioritize since you can’t fund everything at once. Match each goal with an appropriate strategy.
Short-term goals need safe accounts. Long-term goals can handle more risk.
Step 3: Analyzing the Client’s Current Course of Action
Compare where you are to where you want to go. Look at your current savings, investment returns, retirement progress, and insurance coverage. Run the numbers honestly.
Common gaps include inadequate emergency savings, poor insurance, bad tax efficiency, and high-interest debt.
For each gap, brainstorm solutions. There’s usually more than one way to fix a problem.
Step 4: Developing Financial Planning Recommendations
Turn your analysis into actionable advice. Each recommendation should be specific, like “increase 401(k) contributions to 15%.” Make sure recommendations fit your life.
Be realistic with assumptions. Most planners use 6% to 8% for stock returns.
Acknowledge your constraints and rank priorities when you can’t do everything at once.
Step 5: Presenting Financial Planning Recommendations
Each recommendation needs a clear explanation. Understand what problem it solves, how it helps you reach goals, and what the tradeoffs are.
Use plain language and show the math when helpful.
Consider how recommendations fit your values. The mathematically optimal choice isn’t always right for you.
Step 6: Implementing the Financial Planning Recommendations
Write down specific tasks: open accounts, transfer money, change beneficiaries, update insurance. Set timelines.
Start with highest-priority items. Set up automatic systems where possible.
Track progress and celebrate each completed step.
Step 7: Monitoring Progress and Updating the Financial Plan
Review your plan at least once a year. Regular reviews keep you on track and provide accountability.
Adapt when big things happen: job changes, marriage, divorce, children, inheritance, or health issues.
Small adjustments prevent drastic changes later.
Compliance and Ethical Responsibilities in the Financial Planning Process
Financial planning involves trust and legal obligations. The CFP Board sets standards that protect clients and maintain professional integrity.
CFP professionals must put client interests first, act with competence, maintain confidentiality, be transparent about conflicts of interest, and follow the seven-step process.
Violating these standards can result in losing certification or legal consequences.
Firms that employ CFP professionals share responsibility. They must have systems that support ethical behavior, including proper supervision and training.
Even if you’re not working with a CFP, these standards show what good planning looks like.
Good documentation protects everyone. Keep records of information gathering, goal discussions, analysis, recommendations, and decisions made.
Transparency means no hidden fees or conflicts of interest. You should know exactly what you’re paying and why.
Ask for everything in writing. If an advisor resists documenting recommendations, that’s a red flag. Written records protect you if memories differ later.
Tips for Successfully Following the 7 Step Financial Planning Process
These practical tips help you stay on track and get the most from your financial plan.
- Start small and build momentum. You don’t need to complete all seven steps in one sitting. Focus on gathering your financial documents this week. Next week, write down your goals. Break the process into manageable chunks.
- Be honest with yourself about your situation. Sugarcoating your finances only hurts you. If you’re overspending, acknowledge it. If you’re behind on retirement savings, face it. You can’t fix problems you won’t admit exist.
- Review your plan regularly but don’t obsess over it. Checking your investments daily creates stress and bad decisions. Set quarterly or annual review dates and stick to them. Let your plan work between reviews.
- Get help when you need it. Complex tax situations, estate planning, or business finances might require professional guidance. There’s no shame in asking for help. Even financial planners consult other experts.
- Keep learning about money management. Read books, listen to podcasts, or take courses. The more you understand, the better decisions you’ll make. Financial literacy is a lifelong process.
- Stay flexible. Life rarely goes exactly as planned. Your plan should guide you, not restrict you. When circumstances change, adjust your strategy. The best plan is one that evolves with you.
Conclusion
I remember staring at my own messy finances years ago, feeling completely lost. That’s when I learned the 7 step financial planning process actually works.
You don’t need perfect credit or a huge salary to start. Just grab a notebook this week and write down one financial goal. That’s how I began.
Financial planning isn’t scary once you break it down into steps. Pick one action today and build from there.
Drop a comment below with your biggest money question. I read every single one and love helping where I can.
Frequently Asked Questions
What is the 7 step financial planning process?
It’s a structured framework for creating and maintaining a complete financial plan. It covers understanding your situation, setting goals, analyzing options, making recommendations, taking action, and monitoring progress.
How long does the financial planning process take?
The initial process typically takes several weeks to a few months. Gathering information takes a few days, while analysis and implementation can take several weeks depending on your situation.
Do I need a financial advisor to follow these steps?
No, you can do it yourself. However, complex situations like business ownership, large estates, or complicated taxes often benefit from professional help.
How often should I review and update my financial plan?
Review your plan at least once a year. Update it immediately when major life changes occur like job changes, marriage, divorce, having children, or health issues.
What’s the difference between financial planning and investment management?
Financial planning covers your complete financial picture including goals, budgeting, insurance, and taxes. Investment management focuses only on how your money is invested.
