Financial Plan Development

Written by True Tamplin, BSc, CEPF®

Reviewed by Subject Matter Experts

Updated on July 11, 2023

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What Is Financial Plan Development?

Financial plan development is the process of creating a comprehensive financial roadmap that outlines your short and long-term financial goals, and the strategies and tactics required to achieve them.

It involves analyzing your current financial situation, identifying potential risks and challenges, and developing a plan to achieve your financial goals.

A well-designed financial plan takes into consideration your income, expenses, debts, savings, investments, and other financial aspects of your life.

It includes strategies for managing cash flow, minimizing taxes, investing for retirement, protecting your assets, and achieving other financial objectives.

The process of financial plan development may involve working with a financial advisor or planner, who can help you create a plan that aligns with your unique needs and circumstances.

Setting Financial Goals

Short-Term, Medium-Term, and Long-Term Goals

Financial goals can be categorized into short-term (less than one year), medium-term (one to five years), and long-term (more than five years) objectives. Identifying and prioritizing these goals helps in creating a roadmap for achieving them.

Identifying Personal and Business Objectives

It is essential to determine the specific financial objectives for personal or business growth. This may include buying a house, starting a business, or planning for retirement.

Prioritizing Goals and Determining Feasibility

Once the goals are identified, they need to be prioritized based on their importance and feasibility. This helps in allocating resources and time effectively.

Gathering and Analyzing Financial Information

Collecting Personal or Business Financial Data

To develop a financial plan, one must gather relevant financial data, including income sources, assets and liabilities, and expenses.

Analyzing Financial Data

Financial data analysis includes calculating financial ratios, assessing cash flow, and determining net worth. This information helps in identifying areas that need improvement and making informed decisions.

Developing a Budget

Creating a Detailed Income and Expense Statement

A budget is a financial plan that allocates funds to various categories based on anticipated income and expenses. Creating a detailed expense and income statement is the first step in developing a budget.

Allocating Funds to Various Categories

Once the income and expenses are estimated, funds must be allocated to various categories, such as housing, transportation, savings, and investments.

Adjusting and Tracking the Budget Over Time

A budget should be flexible and adjustable, as financial situations can change. Regularly tracking the budget helps in staying on track with financial goals.

Developing a Budget

Savings and Investment Strategies

Importance of Saving and Investing

Saving and investing are crucial for accumulating wealth and achieving financial goals. These strategies help in growing money over time and ensuring financial security.

Assessing Risk Tolerance and Investment Objectives

Understanding one's risk tolerance and investment objectives is essential for developing an appropriate investment strategy.

Diversification and Asset Allocation

Diversifying investments and allocating assets helps in managing risk and optimizing returns.

Evaluating Investment Options

Various investment options, such as stocks, bonds, mutual funds, real estate, and retirement accounts, should be evaluated based on their potential returns and risks.

Risk Management and Insurance

Identifying Potential Risks and Vulnerabilities

A comprehensive financial plan should address potential risks and vulnerabilities that could impact financial goals.

Evaluating Insurance Needs

Insurance policies, such as life, health, property, and casualty insurance, help in managing risks and protecting against financial losses.

Developing a Risk Management Plan

A risk management plan outlines strategies for mitigating risks and managing unforeseen events.

Tax Planning and Strategies

Understanding Tax Implications of Financial Decisions

Tax planning involves understanding the tax consequences of financial decisions and identifying tax-saving opportunities.

Identifying Tax-Saving Opportunities

Strategies for minimizing tax liabilities should be incorporated into the financial plan, ensuring compliance with tax laws and regulations.

Retirement Planning

Estimating Retirement Income Needs

Retirement planning involves estimating the income needed to maintain a desired lifestyle during retirement.

Creating a Retirement Savings Strategy

A retirement savings strategy outlines the steps needed to accumulate the required funds for retirement.

Identifying and Evaluating Retirement Income Sources

Various sources of retirement income, such as Social Security, pensions, and investment accounts, should be identified and evaluated based on their potential to provide the necessary funds during retirement.

Estate Planning

Importance of Estate Planning

Estate planning ensures that an individual's assets are distributed according to their wishes after their death, minimizing taxes and avoiding potential conflicts among heirs.

Preparing Necessary Documents

Documents such as wills, trusts, and powers of attorney should be prepared to ensure proper management and distribution of assets.

Strategies for Minimizing Estate Taxes

Incorporating strategies to minimize estate taxes, such as gifting assets and creating trusts, helps in maximizing the wealth transferred to heirs.

Monitoring and Reviewing the Financial Plan

Importance of Regular Reviews

Regularly reviewing and updating the financial plan ensures that it remains relevant and aligned with changing financial goals, market conditions, and life events.

Assessing Progress Towards Financial Goals

Monitoring progress towards financial goals helps in identifying areas that need improvement and adjusting the plan accordingly.

Adjusting the Plan as Needed Based on Life Changes and Market Conditions

Life events, such as marriage, divorce, or job changes, and fluctuations in market conditions may require adjustments to the financial plan to stay on track with financial goals.

Working With Financial Professionals

Selecting the Right Financial Advisor

Choosing a financial advisor who understands one's financial goals, assess risk tolerance, and investment objectives is crucial for developing a personalized financial plan.

Understanding the Roles and Responsibilities of Financial Professionals

Financial professionals, such as financial planners, investment advisors, and insurance agents, play different roles in the financial planning process. It is essential to understand their responsibilities and areas of expertise.

Building a Long-Term Relationship With a Trusted Advisor

Developing a long-term relationship with a trusted financial professional can help in navigating the complexities of financial planning and staying on track with financial goals.

Checklist for Working With Financial Professionals


In summary, financial plan development is an essential process for individuals and businesses to achieve their financial goals and secure a stable financial future.

By setting clear objectives, gathering and analyzing financial data, creating a budget, implementing saving and investment strategies, managing risks through insurance, planning for taxes, retirement, and estate, it is possible to establish a comprehensive and adaptable financial plan.

Regularly monitoring and reviewing the plan ensures that it remains aligned with changing financial goals and circumstances.

Working with a trusted financial professional can provide valuable guidance and support throughout the financial planning process, helping to navigate complexities and make informed decisions.

Ultimately, a well-crafted financial plan serves as a roadmap to financial success and long-term security.

Financial Plan Development FAQs

About the Author

True Tamplin, BSc, CEPF®

True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.

True is a Certified Educator in Personal Finance (CEPF®), author of The Handy Financial Ratios Guide, a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.

To learn more about True, visit his personal website or view his author profiles on Amazon, Nasdaq and Forbes.

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