How to Create a Financial Plan

Daniel Brown

Financial ExpertUpdated on October 6, 2022

i Disclosure statement

The future is uncertain. You may have enough finances today, but tomorrow you may find yourself going through hard times. 

Jump straight to…

If you do not have a sound financial plan, you can’t be sure whether your finances can cover your current and future priorities and financial goals. It’s only through financial planning that you can determine your financial goals and create a balanced plan to achieve those goals.

This article outlines what you need to know about financial planning, including creating one and managing your resources to achieve financial security. 

Read on as we discuss the step-by-step process in building a financial plan, finding a competent financial planner, and reviewing your financial plan. 

Kelly Sikkema | Unplash

What Is a Financial Plan? 

A financial plan refers to a document that specifies your current financial situation, your long-term monetary goals, and the strategies to accomplish those goals. 

You may create this document on your own or with the help of a professional financial planner. 

Preparing a financial plan begins with a comprehensive evaluation of your financial state and future expectations. It also involves calculating your net worth, determining your cash flow, and considering priorities like business goals and education for your children. 

Financial planning is a long-term strategy to wisely manage your finances so that you can achieve your financial goals. To create an effective financial plan, you must establish your goals first. 

The data on your personal finance and future expectations is gathered for analysis and evaluation. Once this stage is completed, a financial plan can then be developed. 

During the plan’s implementation, monitoring should be done to make necessary adjustments to achieve the desired goals. 

Types of Financial Plans 

Financial plans vary depending on your purpose and financial goals. It helps to know the plan type in order to determine which strategies you can apply to meet your objectives. 

Two common types of financial plans are: 

  • Personal Financial Plan

A personal financial plan includes assessing your finances, such as income, assets, liabilities, and investments. Personal financial planning can be directed towards achieving specific personal financial goals. 

You may create a financial plan for yourself for whatever personal reason, such as getting married. Whatever the reason, you have to properly assess your financial situation and formulate effective financial or investment strategies to meet your long-term and short-term goals.

  • Business Financial Plan 

A business financial plan includes the components mentioned in a personal financial plan. 

However, a business financial plan focuses on forecasting financial results and determining how to use the company’s financial resources to achieve short-term and long-term objectives.

Steps to set up a business financial plan include calculating setup costs, forecasting profit and loss, and working out your cash flow projections.

Part of the financial planning process is applying for an Australian business number (ABN) for tax and other business activities.

Identifying Your Financial Goals

Financial planning will work to your advantage if you know what goals to accomplish. At every stage of life, there are specific financial priorities. 

Your financial goals will vary depending on your age, income, and personal plans. 

Every life stage brings several priorities that require different investing approaches.

Young to Mid-Life Stage

Most people are establishing and building their careers at this stage. Some are probably starting their own families. Generally, people at this stage prioritise the following: 

  • Travelling
  • Buying a first home
  • Getting married
  • Having children
  • Family health care
  • Business planning

Mid-Life Stage

This is the stage where you may be trying to establish a comfortable lifestyle and planning for your future. Your priorities may include: 

  • Income or lifestyle protection
  • Healthcare
  • Investments
  • Retirement planning
  • Inheritance
  • Tax management
  • Debt management

Pre-Retirement Stage 

You may have been promoted or established a good business and ready to retire after some years of hard work. Your concerns at this stage may include: 

  • Family health care
  • Debt elimination
  • Helping your children
  • Retirement planning
  • Wills and trusts
  • Business exit strategy

Retirement Stage

After 20 or more years of staying in a job or managing your business, you will be retiring. At this stage, your priorities for a retirement plan may include the following: 

  • Aged care planning
  • Retirement savings
  • Health care
  • Protection of assets
  • Travelling
  • Estate planning
  • Inheritance tax mitigation

Identifying your financial goals regardless of what stage of life you are in should be based on your personal needs and expectations. 

How Do You Build a Financial Plan? 

Creating an appropriate financial plan for your circumstances and goals can be challenging, but at the same time rewarding when you are able to achieve financial security. 

Here is a step-by-step guide to help you get started with creating a financial plan that works. 

1. Set Specific Financial Goals

Setting goals is the first step in successful financial planning. At this stage, you need to assess your current financial situation and identify short-term, mid-term (medium-term), and long-term goals to achieve financial security. 

When evaluating financial goals you want to focus on, it is essential to be realistic about your expectations. 

2. Create a Budgeting System

Formulating and executing strategies to achieve your financial goals requires some funds. Therefore, budgeting is an integral part of making financial decisions.

You can create a budgeting system using traditional methods, like going through your bank statements and bills and categorising expenditures on a balance sheet. Or you may try using free budgeting programs, some of which are available online, to make the budgeting process more efficient. 

3. Incorporate Taxes

Incorporating tax planning into your financial plan increases the probability of achieving your goals. 

With a financial advisor on your side, you can analyse your current and future tax deductions or liabilities and develop tax strategies to minimise the taxes you pay. 

 Tax planning is a vital component of a sound financial plan and will help you manage your current and future cash flow.  

4. Prepare an Emergency Fund

You can’t predict when emergencies will strike. There are, however, ways to prepare for them and make sure that you have extra funds to cover sudden expenses. 

Failing to build an emergency fund may lead to a financial crisis. To keep you on track to pursuing your financial goals, no matter the situation, make sure you set aside some emergency funds. 

It is ideal to have a savings account that can cover three to six months’ worth of expenses for your financial obligations and basic needs.

5. Manage Your Debts

Managing debt is another crucial task in financial planning. After all, debts can affect cash flows and your overall financial status. 

With a financial advisor’s help, you can analyse debts including mortgages, student loans, home loans, and credit card debt. Stay on top of your obligations by formulating a debt repayments strategy that works for you.  

6. Get the Right Insurance

Having insurance with low interest rates protects you and your loved ones during emergencies or any sudden and drastic life events. 

For example, an insurance policy can provide funds to your beneficiary when you pass away prematurely. 

Term life insurance is a popular choice for those who want to cover the financial obligations of raising a family. This type of insurance acts like a safety net that provides funds for sending kids through college and paying a mortgage, for example, if you’re no longer around to earn a paycheck.

A term life usually requires medical underwriting, or evaluating an application for health insurance coverage by examining the applicant’s medical history. The amount of coverage in this insurance is determined by the applicant’s risk factors.

7. Plan for Your Retirement

Retirement planning begins with knowing your retirement goals and how much time you will need to achieve them. Check the kinds of retirement accounts that can help you raise money to fund your future. 

Your current age and expected retirement age serve as the roadmap or initial groundwork of an effective retirement strategy, which you can include in your financial plan.  

8. Boost Your Super

Look at essential aspects of your super and see how you can add more money to your fund. If you can afford it, making those extra contributions is a great way to boost your savings and reduce your tax.

Ways to add contributions include the following:

  • Spouse contributions – If your spouse earns less than $40,000 per year, you can contribute to your spouse’s super fund and claim an 18% tax offset (up to $3,000) on your contributions through your tax return.
  • Salary sacrifice – You can have your employer pay some of your before-tax income into your super, on top of the super guarantee.
  • Consolidation of multiple super accounts into one – This makes your investment strategy easier to manage.
  • Review of your investment options and asset classes – You can choose one that’s more suited to your attitude to risk and time available.

9. Develop an Estate Plan

Estate planning is knowing how your assets will be managed, preserved, and distributed after death. Planning also includes managing properties, investment portfolios, and financial obligations if you get incapacitated. 

Creating an estate plan is essential for protecting family wealth, providing for a spouse and children, funding education, or leaving a legacy to a charitable cause.

10. Review Your Financial Plan Frequently

Once you’ve gone through the other steps, you can review your financial plan for accuracy and completeness. Have you included everything in the plan, and are the strategies appropriate to meet your financial goals? 

An excellent review of your financial plan and financial position can give you the confidence to execute your plans accordingly. 

Special Considerations of a Financial Plan 

Financial plans have no specific templates. However, a financial planner can create one that is appropriate for your circumstances and goals to help you transition smoothly through the financial phases in your life. 

Special considerations that have to be addressed or changed in your financial plan include: 

  • Long-term Investment Plan – This customised plan is based on specific investment goals and a personal risk tolerance profile. 
  • Comprehensive Risk Management Plan – This includes assessing your personal life insurance and disability insurance, property and casualty coverage, liability coverage, and catastrophic coverage. 
  • Estate Plan – It involves the appropriate arrangements for the benefit and protection of identified heirs in case of death or incapacity. 
  • Retirement Strategy – Regardless of how many priorities are considered, a retirement strategy should be part of your financial plan. The plan should consider accumulating the retirement income to support your basic needs. 
  • Tax Reduction Strategy – How much you earn isn’t nearly as important as how much you retain, which is why reducing your tax should be part of your wealth management. Aim to minimise and even negate taxes on personal income as much as the tax code. 

Working With a Financial Planner

Australian financial planners help individuals and corporations manage their finances and achieve long-term financial goals. They can extend assistance and share their expertise in investment planning, insurance, education, retirement planning, and other financial endeavours. 

A financial adviser or planner will help their clients analyse goals, risk tolerance, and life or corporate stages. 

 Financial advisers help determine a suitable class of strategies or investments to meet the clients’ objectives. 

If you require  professional financial services from a certified financial planner, you should consider the following factors: 

  • Credentials
  • References
  • Fees
  • Area of expertise
  • Services
  • Dispute management
  • A designation like acting as fiduciary

When a financial planner acts as a fiduciary (trustee), they’re obliged to perform their duties in the client’s best interest. Likewise, they cannot personally benefit from managing a client’s assets. 

Ideally, it is best to interview at least three financial planners before hiring one for your financial goals. When the prospect meets your criteria, that’s the time you can begin the process of financial planning. 

Tips on Reviewing Your Financial Plan 

Financial planning is a systematic process that does not end after you invest your money and acquired assets. You need to regularly monitor how the funds are performing.

The financial plan review ensures that efforts are directed towards your life goals. 

These are some tips to keep in mind when reviewing your financial plan: 

  • Create an Appropriate Routine

Without a routine, you may not reach your targets on time. 

  • Set and Review Your Financial Goals

Once you have identified your financial goals, financial planning can commence at any time. However, the process does not end there. 

Reviewing your financial goals is as important as identifying them at the beginning. You may have specific considerations in mind to check whether your financial goals are realistic and appropriate. 

  • Reconcile Your Bank Accounts and Bill Payments

Your bank balance must reflect progress instead of losses. Meaning, your wealth should have increased over time regardless of the expenses. 

Checking your bank account regularly, as well as the disbursements you have made in a given period, is a critical part of financial planning. It will help ensure you have the right strategies throughout the process.

  • Review Your Savings and Investments

How much savings do you have? Are your investments growing? These are two basic questions that can help you review your current financial status. 

Suppose your savings are improving and your investments are working well. In that case, you are accomplishing your financial goals. 

  • Review Your Insurance Policies

Insurance policies may change over time. Reviewing these updates is essential to determining if the terms and conditions still work to your advantage. 

You may consider better options once you find that the insurance policies have become unfavourable for meeting your financial goals. 

  • Check Your Net Worth 

The main reason people create a financial plan is to achieve specific financial goals, like having a high net worth, which can indicate your strategies are being implemented effectively. 

Checking your net worth regularly is also an essential part of preparing, creating, and reviewing a good financial plan. 

Questions to Ask When Reviewing a Financial Plan 

Asking yourself crucial questions when reviewing your financial plan can help you with the essential things that deserve careful consideration. 

Questions to ask during the financial plan review include: 

  • Are my financial goals still practical and realistic?
  • What steps did I take last month that drove me closer to my goals?
  • What money mistakes did I make last month and why?
  • How much budget or funds are available?
  • What big expenses should I anticipate soon?
  • What can I do to ensure I have a better month next month?
  • What is the best thing I can do to manage or pay off my debts?
  • Are the available savings I have now enough for my retirement?
  • What changes should I make in my savings plan? 
  • Which investments can give me high interest rates?
  • How can I minimise the taxes I pay?
  • Which insurance best suits my goals?
  • What else could be done to achieve my financial goals as planned? 

When Is Financial Advice Necessary?

Certain areas of financial planning require specialised knowledge and experience from a certified financial planner. 

When your financial plan involves a large sum of money or assets, a financial planner can help you achieve financial success by giving investment advice and minimising the risks of possible losses or failure. 

Common scenarios that may require working with a financial planner include:

  • You are nearing retirement
  • You inherited wealth from your parents and plan to invest the money
  • You just got married and want someone to help manage your finances
  • You got divorced or widowed and need some help with financial matters
  • Your parents are getting older and you need help managing overall finances
  • You hate financial planning and want professional help to ensure that you will not go broke in the future
  • You can prepare a financial plan yourself but want a second opinion to ensure you don’t miss any essential points

Other situations where you may need to seek out a financial planner include:

  • You’re paying off your house
  • You’re funding your children’s college education
  • You’re making an estate plan

What if you could tap into the wisdom of an experienced financial adviser instead of taking the all too common ‘hit-and-hope’ approach?  

Many people may be unaware of this…but just like you, 41% of Aussies intend to get financial advice rather than going it alone, according to an Australian Securities and Investments Commission (ASIC) report.

Find the right Financial Adviser for you with the help of an MMS Money Buddy. 

When you book a call with an MMS Money Buddy, you’ll:

✓ get a better understanding of your money matters

✓ have an idea of the experts you can call on to help you reach your goals

✓ be matched with the right financial adviser who can help simplify your family’s journey to financial wellness  

My Money Sorted is your stress-free pathway to getting ahead with your money. Here’s what your journey will look like:

Step 1: Start off with a quick money matters session with your MMS Money Buddy

Step 2: Get matched with a licensed Finance Adviser that’s right for your money situation

Step 3: Take the first step towards your money goals with a clear and sound roadmap prepared by an experienced Financial Adviser

It’s that easy!


I want to see all my options with the help of a Finance Expert

Call Our Team Today


  1. Investopedia, Term Life Insurance, retrieved from https://www.investopedia.com/terms/t/termlife.asp    
  2. Investopedia, 401 (K) Plans: The Complete Guide, retrieved from https://www.investopedia.com/terms/1/401kplan.asp   
  3. Investopedia, What is Estate Planning? Retrieved from https://www.investopedia.com/terms/e/estateplanning.asp     
  4. Investopedia, What is a Financial Plan, retrieved from https://www.investopedia.com/terms/f/financial_plan.asp 
How Much Does a Financial Planner Cost?
Financial Planning

How Much Does a Financial Planner Cost?

Read more
The Importance of Tax Planning
Financial Planning

The Importance of Tax Planning

Read more
How Much Super Do You Need to Retire?

How Much Super Do You Need to Retire?

Read more
Featured Categories


Easily opt out at anytime.
Subscribe for financial expertise delivered straight to your inbox weekly.