Understanding the Basics of Financial Planning: A Step-by-Step Guide
Understanding the Basics of Financial Planning: A Step-by-Step Guide
Why Financial Planning Matters and Why You Should Listen to Me
When it comes to securing your financial future, the process can often feel overwhelming or overly complex. Whether you’re planning for retirement, investing, or managing debt, understanding the basics of financial planning is critical to making confident and informed decisions.
In this article, you’ll gain practical, easy-to-follow steps to help you create a solid financial foundation. But more importantly, you’ll learn from real-world experiences I’ve had working with individuals and families who’ve faced the same challenges you might be dealing with right now.
Why prospects and clients like to hear what I have to say on this topic?
I’m Ben Loughery, CFP®, and as the founder of Lock Wealth Management, I’ve helped clients clarify their goals, reduce stress, and build financial plans that reflect their personal vision. A financial plan doesn’t just secure your future—it empowers you today.
• The role of budgeting, investing, and risk management
• Real-world examples and insights from clients I’ve worked with
• Actionable strategies you can apply today
1. Financial Planning Starts with Clarity
Why Clarity is the First Step
Before diving into numbers and spreadsheets, I always recommend starting with clarity—understanding where you stand financially and where you want to go.
In my experience, clients often skip this part, jumping straight to investments or tax strategies without understanding the bigger picture. But clarity is crucial because:
• It reveals blind spots.
• You align goals with your lifestyle.
• It sets the foundation for realistic, actionable plans.
Questions to Ask Yourself:
• Where do I want to be financially in 5, 10, or 20 years?
• What are my biggest financial stress points today?
• How do I define financial success for my family or business?
I recommend writing these answers down and revisiting them periodically as your goals evolve.
2. Building Blocks of a Financial Plan
The Core Elements
In every plan I build with clients, I focus on these five areas:
1. Budgeting and Cash Flow Management
2. Debt Management
3. Retirement Planning
4. Risk Management (Insurance and Protection)
5. Investing for Growth
1. Budgeting and Cash Flow Management
In my experience, budgeting is often overlooked but plays a vital role in wealth accumulation and retention. Without clear cash flow management, even high earners can feel financially stretched.
Key Actions:
• Track all expenses using tools like Monarch (Source: Monarch Money). Monarch offers personalized budgeting tools that sync across devices, giving you a clear picture of your financial health in real-time.
• Automate savings and debt payments to ensure consistent progress. Automation is crucial because it removes the emotional decision-making involved with saving and investing.
In my own experience I personally noticed that I had two renters insurance policies I was paying for in the same calendar year and I would not have caught this if it weren't for Monarch.
As a hypothetical someone earning six figures but felt like they were living paycheck to paycheck decided to start simply tracking expenses and cutting back on unnecessary subscriptions. As a result they were able to redirect over $1,200 a month toward investments and savings.
2. Debt Management
Debt can be a powerful tool—or a major hindrance. I’ve found that the key is knowing when to leverage debt and when to pay it down aggressively.
Debt Strategies:
• Focus on high-interest debt first (credit cards).
• Consider refinancing through Credible (Source: Credible), which compares rates from multiple lenders. This can significantly lower monthly payments on student loans or personal loans.
• Use the debt snowball or avalanche method depending on your personality. Snowballing builds momentum by paying off smaller debts first, while Avalanche saves more on interest by focusing on high-interest debts.
3. Retirement Planning
Retirement planning is personal—there’s no one-size-fits-all approach. I work with clients to balance tax strategies, investment growth, and predictable income streams.
Real-World Example: A couple had multiple retirement accounts but little tax diversification. They initiated gradual Roth conversions to reduce their taxable income in retirement, potentially saving them thousands in taxes over 20 years.
4. Managing Investment Risks
I often tell clients, investing isn’t just about returns—it’s about managing risks. A diversified portfolio aligned with your goals prevents emotional decisions during market downturns.
Financial planning isn’t a one-time activity—it’s an ongoing journey. By focusing on clarity, budgeting, risk management, and retirement planning, you build a foundation for long-term success.
Disclaimer: Case studies are hypothetical and do not relate to an actual client of Lock Wealth Management. Clients or potential clients should not interpret any part of the content as a guarantee of achieving similar results or satisfaction if they engage Lock Wealth Management for investment advisory services.
