5 Financial Planning Steps That Make The Financial Planning Process Easy

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Author: Joseph Reinke, CFA

Do you want to take control of your finances and reach your financial goals? Financial planning is a great way to do just that. While the financial planning process may seem daunting at first, it doesn’t have to be! In this blog post we will break down the five steps of financial planning into easy-to-follow steps so that you can get started today.

The five financial planning steps are: setting goals, creating a budget, prioritizing and focusing on specific areas of finance, simulating the plan for accuracy and finally executing the plan.

By following these simple steps you will have taken the first leap towards taking control of your finances and achieving financial freedom!

If you’d like to see an example of you to apply the steps below, check out how Connor built his financial plan.

You can also watch the video version of this article below or check out this:

Step 1: Starting Your Comprehensive Financial Plan

You can’t plan if you don’t know where you are going. For example, if someone asked you to give them directions, you’d ask them where they are going. If they responded, “I don’t know just give me directions” you’d look at them like they are crazy.

Financial planning works the same way. You can’t expect financial planning recommendations if you don’t know where you want to go.

Therefore, you have to identify both your personal and financial goals.

They also should be both short-term and long-term and consist of items such as saving for a car, saving for a wedding, saving for a home purchase, paying off debt, investment goals etc… 

The key is to prioritize them. I’ll explain more below.

Step 2: Understand Your Current Life Situation

Many people want to dive right into investing topics when they begin the process of building their financial plan.

However, you can’t plan your financial future if you don’t have a clear understanding of you financial circumstances today.

The key to understanding is organizing and the purpose of your budget is to do just that.

The key to budgeting correctly is to keep it simple and do it with a purpose.

When you first build your budget, you divide your money into three categories: Day-to-day money, money for future self, and risk management. Doing so will make building a financial plan, implementation of it, and obtaining your financial goals very easy.

Another key is that you only put minimums into money for future self. This consists of putting the minimum amount you need to towards your loans each month, investing only the minimum in your employee retirement such as a 401k to get the match, and saving a minimum of $50 a month into your Roth IRA if you are eligible.

All you are doing in this step is putting in minimums so you can get an understanding of your cash flow.

In step three we will discuss what to do with the remaining cash flow you still have.

Diving Into Step 2

Knowing your current finances is much more than just doing a budget. 

For example, your income and background plays a massive role in your financial plan and most people tend to overlook it including someone that is helping you as a financial planner.

The type of income you have (salary, commission, hourly, 1099, self-employed, etc…) influences how much risk you have in profile. 

Your education level as well as other items greatly influence your income levels today and in the future. 

Other characteristics such as working out, playing sports, etc… capture behavioral traits that speak to your discipline. Said discipline, or lack thereof, will impact how you implement your plan.

All these items all called human capital and it has a value, just like any other asset and time you spend developing your human capital is an investment.

Human Capital & Its Role In The Financial Planning Process

Your human capital is the most important asset when you are younger. 

It literally dictates everything you do financially such as your investment risk tolerance, how much emergency fund you should have, spending, priorities related to goals, student loan repayment options, your financial security or lack their of, retirement, personal risk related to economic events, etc…

For example, let’s say you have really stable wages with a low amount of loans. You have low financial risk and can afford more home relative to someone with unstable commission income even though they might have low debt as well.

Unfortunately, it’s hard to look at this and easily tell where you stand and it can become overwhelming

BUT DON’T WORRY! If you are a FitBUX member you can easily see how much your human capital is worth today and the factors that are going into it by analyzing your FitBUX Score or asking your FitBUX Coach.

Step 3: Prioritize And Focus

In step two, you built your budget with minimums only.

Now you have to look at your financial situation, look at your goals, and determine how you want to allocate the rest of your money.

One major key to building a successful financial plan is to focus. Most people try to do too much at the same time such as save in an IRA, their 401k, save for a house, pay off student loans, pay off their car, etc…

Try to focus your extra money on 1 item such as paying off one debt aggressively and then after that makes out your savings, etc….

Focusing is a major component of achieving financial freedom and I can’t say it enough!

Step 4: Simulate

Step four in the financial planning process is the one most people skip.

Doing so is a major problem because you don’t know if the plan you just set up will allow you to reach your goals. You must simulate the plan and review it.

Once you simulate the plan, review it to make sure you will achieve your long term goals and short term goals. If not, you must identify why you aren’t and make adjustments.

One key item to remember is hitting your short-term goals should take priority over achieving your long-term goals.

You will also want to simulate various financial plans. For example, in one you may prioritize investing, in another you aggressively repay loans, and in another you focus on savings for home vs renting.

Below I provide an snapshot of what this should look like courtesy of FitBUX’s financial plan building technology.

Step 5: Implementation

Your financial plan and hitting goals such as loan repayment and retirement can’t happen if you do not implement your plan and do so correctly.

I can’t overstate this because I seen it so many times where people set up a plan then never do it!

When you are tracking your plan you must track your progress and its an ongoing process.

The key to making your life easy is to track what percentage of your income is going where. Overtime, you want a greater percentage of it going to the money for future self category than day to day expenses.

The only time you need to update your plan is when you’ve made enough progress and have achieved a goal and/or you have a major life event happen.


Financial planning is a complex process, but it doesn’t have to be intimidating. By following the five steps outlined in this article and leveraging FitBUX’s financial planning technology, you can create an effective plan that helps you reach your short-term and long-term goals while maintaining financial security.

With these tools at your disposal its easy to achieve success with your finances and you can also remove a lot of stress from your life! So what are you waiting for? Get started on creating a sound financial future today.

Joseph Reinke, CFA

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About the Author

Joseph Reinke is a Chartered Financial Analyst (CFA) Charter Holder and founder of FitBUX which has helped over 14,000 young professionals on their journey to financial freedom. Joseph has been personally investing since he was 12 years old.

In addition, he has experience in student loans, mortgages, wealth management, investment banking, valuation, stock trading, and option trading. He has been on 100s of podcast and has been invited to 100s of universities to discuss financial planning with their soon to be graduates.

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